How to offer finance for retail

Introduction

In today's competitive retail environment, offering finance options can be a powerful way to attract more customers, increase sales, and improve customer satisfaction. With many consumers seeking more flexible payment methods, retailers who provide finance options are often seen as more accessible and customer-friendly. However, implementing a retail finance solution requires careful planning, the right partnerships, and an understanding of the regulations and best practices.

In this guide, we’ll explore how to offer finance for retail, why it’s beneficial, and how to partner with a reliable broker like Kandoo to ensure a smooth and effective financing process.

Why Offer Finance in Retail?

Before delving into the mechanics of how to offer finance in retail, it’s important to understand why doing so is beneficial. Offering finance can have a profound impact on your business by:

1. Increasing Sales and Average Transaction Value

Offering finance allows customers to spread the cost of their purchase over time, making larger or higher-priced items more affordable. This can lead to increased sales, particularly for big-ticket items like furniture, electronics, or luxury goods. When customers can pay in instalments, they’re more likely to make larger purchases, which can boost your average transaction value.

2. Attracting New Customers

Flexible payment options can help attract new customers who may not have considered shopping with you otherwise. Many consumers are looking for ways to manage their finances better, and being able to offer interest-free or low-interest payment plans can make your business stand out from competitors.

3. Improving Customer Loyalty

Offering finance can improve customer satisfaction and loyalty by providing more flexible payment options. Customers appreciate having more control over how they pay for their purchases, and they’re more likely to return to a retailer that offers convenient payment solutions.

4. Enhancing Cash Flow for Your Business

With retail finance, retailers typically receive the full payment for the product upfront from the finance provider, while the customer repays the finance company over time. This ensures that your business maintains a healthy cash flow without having to wait for customers to pay off their purchases.

Understanding the Basics of Retail Finance

Before you begin offering finance to your customers, it’s important to understand the different types of retail finance options available. Here are some of the most common finance solutions used in retail:

1. Interest-Free Credit (0% APR)

Interest-free credit is one of the most popular finance options in retail. Customers can spread the cost of their purchase over a set period, usually between 6 and 24 months, without paying any interest. This option is often attractive to consumers because they only pay the price of the product, with no additional costs.

2. Interest-Bearing Credit

In this option, customers pay interest on their finance agreement. Interest-bearing credit can be offered over a longer period, sometimes up to five years or more, making it a good option for customers who want to spread the cost over a longer timeframe. Retailers often use this option for higher-value items, such as home appliances or furniture.

3. Buy Now, Pay Later (BNPL)

BNPL allows customers to defer payment for a set period (usually 3-6 months) before paying off the balance in full or spreading the cost over several instalments. This option is especially popular for younger consumers and online retailers, as it provides an immediate purchase with delayed payment.

4. Hire Purchase

With hire purchase, customers pay for an item in instalments, but ownership of the product only transfers to the customer once all payments have been made. This option is commonly used for high-value items such as cars or home appliances.

Steps to Offering Finance for Retail

Now that we’ve explored why offering finance is beneficial and the types of finance available, let’s take a look at the steps involved in offering finance for your retail business.

1. Understand the Regulatory Framework

In the UK, offering consumer credit or finance is regulated by the Financial Conduct Authority (FCA). If you’re offering finance directly to your customers, you’ll need to be authorised by the FCA. However, many retailers choose to partner with a third-party finance provider or broker who is already FCA-regulated. This can simplify the process and reduce your regulatory burden.

It’s essential to ensure that your business complies with all relevant laws and regulations, including the Consumer Credit Act 1974. Misleading customers about the terms of finance or offering unauthorised credit could result in hefty fines or legal action.

2. Partner with a Retail Finance Provider

One of the easiest and most efficient ways to offer finance is by partnering with a retail finance provider or broker. These companies specialise in managing the finance process, ensuring compliance, and providing the funds upfront, allowing you to focus on your core business.

Kandoo, a UK-based retail finance broker, is a great example of a company that can help retailers offer finance to their customers. Kandoo works with a wide range of lenders to provide flexible finance options, ensuring that customers can find a payment plan that suits their needs. By partnering with a broker like Kandoo, you can simplify the process of offering finance, ensuring that you remain compliant with FCA regulations while providing customers with a range of payment options.

3. Choose the Right Finance Options for Your Business

Once you’ve partnered with a finance provider, it’s important to choose the right finance options for your business. This will depend on the types of products you sell, your customer base, and your business goals.

For example, if you sell high-value items like furniture or electronics, you may want to offer interest-bearing credit or hire purchase. If you cater to a younger, tech-savvy audience, BNPL could be a more attractive option.

Work with your finance provider to tailor your finance offerings to meet the needs of your customers and align with your business objectives.

4. Integrate Finance into Your Sales Process

Once you’ve chosen the right finance options, you’ll need to integrate them into your sales process. This could involve:

• In-Store Finance: If you have a physical retail location, you’ll need to train your staff to offer finance options to customers. They should be able to explain the benefits of financing, how it works, and assist customers in completing the application process.

• Online Finance: For online retailers, it’s important to integrate finance options into your e-commerce platform. This typically involves adding a finance calculator or “pay monthly” option at checkout. Your finance provider or broker can help with this integration.

Kandoo, for example, offers seamless integration with online platforms, allowing retailers to offer finance options directly on their websites. This makes it easy for customers to apply for finance and get approved quickly, improving the overall shopping experience.

5. Promote Your Finance Options

Once you’ve implemented your finance options, it’s essential to promote them effectively. Make sure your customers are aware that you offer flexible payment plans by advertising these options in-store, online, and through your marketing channels.

• In-Store: Use signage and point-of-sale materials to highlight your finance offerings. Train your staff to mention finance options during customer interactions.

• Online: Promote your finance options on your website, especially on product pages for high-value items. Include a finance calculator to show customers how much they could pay per month.

• Marketing Campaigns: Incorporate your finance options into your email marketing, social media, and advertising campaigns. Highlight the benefits of spreading the cost of purchases to attract more customers.

6. Monitor and Optimise Your Finance Offering

Once you’ve started offering finance, it’s important to monitor its impact on your business. Track key metrics such as:

• The number of customers using finance options
• The average transaction value for financed purchases
• Customer satisfaction and feedback regarding finance options

Use this data to optimise your finance offering. For example, if you find that customers are primarily using interest-free credit, you may want to promote this option more heavily. Alternatively, if customers are asking for longer repayment terms, you may need to adjust your finance offerings to meet their needs.

How Kandoo Can Help You Offer Retail Finance

As mentioned earlier, Kandoo is a UK-based retail finance broker that works with a wide range of lenders to provide flexible finance options for retailers. By partnering with Kandoo, you can simplify the process of offering finance to your customers, ensuring that you remain compliant with FCA regulations and provide a seamless customer experience.

Key Benefits of Working with Kandoo:

• Wide Range of Lenders: Kandoo works with multiple lenders, giving your customers access to a variety of finance options, including interest-free credit, BNPL, and more.

• FCA-Regulated: Kandoo is fully FCA-regulated, ensuring that all finance offerings are compliant with UK regulations. This reduces the regulatory burden on your business.

• Easy Integration: Kandoo offers easy integration with both physical and online retail platforms, making it simple for you to offer finance to your customers.

• Customer Support: Kandoo provides excellent customer support, helping your customers through the finance application process and ensuring they have a positive experience.

By partnering with Kandoo, you can offer a range of finance options to your customers, helping to increase sales, improve customer satisfaction, and grow your business.

Conclusion

Offering finance in retail is a powerful way to attract new customers, increase sales, and improve customer loyalty. By partnering with a trusted retail finance broker like Kandoo, you can simplify the process of offering finance, ensuring compliance with regulations and providing customers with flexible payment options.

Whether you’re looking to offer interest-free credit, BNPL, or hire purchase, Kandoo can help you find the right solution for your business. Start offering retail finance today and unlock the full potential of your business.