Rate hikes becoming a factor
Furniture retailers are becoming concerned with regard to recent rate hikes – and rightly so. Forty-five percent of furniture retailers said the recent hike in March would negatively impact furniture sales in the next three months, according to a survey of 100 retail executives polled at the April High Point Market conference in North Carolina. This is likely because furniture stores will be forced to either stick with their current plans which will become more expensive, or offer shorter-term plans that are often less attractive to consumers. Last year, just 28 percent of retailers said the most recent rate hike will impact sales, while 65 percent said it will have no effect (compared with 43 percent this year).
Despite this sentiment and the high likelihood that the Federal Reserve will bump the benchmark rate to 2.25 percent in September, retailers were still confident heading into the second half of 2018. Ninety-eight percent of retailers queried said sales volume will increase or remain steady in the latter half of the year, while only one executive (1 percent) saying that sales will decline. A positive outlook is a good start, but properly understanding the impact of rising rates and what can be done to mitigate their effect on your bottom line is a critical next step.
Reach younger demographic with financing programs
Retailers understand that customer financing programs are the best way to take advantage of a ripe retail environment. Sixty-three percent of furniture executives surveyed said they feel financing programs help grow sales, encourage customer loyalty and develop repeat business. This figure is comparable to 2017, when 60 percent of retailers queried said credit promotional finance is important to their business.
Now, more than ever, it is important to develop customer relationships as millennials are increasingly interested in making larger purchases, like furniture. Retailers said 57 percent of customers that need financing options are between 18-34 years old, with 35-54-year-olds following closely at 38 percent. This marks a drastic change from 2017, when 18-34-year-olds made up just 10 percent of furniture retailers’ entire customer base. Retailers can create long-lasting customer relationships by offering credit financing while it’s still affordable.
The right partner makes all the difference
As the market evolves, so does its demands. Furniture retailers providing financing to millennials will need to satisfy their unique needs and purchase habits. Young people are increasingly accustomed to seamless, and even cashless, transactions. Removing friction at the point of sale or application for financing is critical. Retailers should seek a partner who can provide the experience that this customer base demands. For this reason, 24.6 percent of retailers said customer service was the most important characteristic they look for in a financing partner, with credibility (18.5 percent) and customizable offerings (14.8 percent) ranking second and third.
With interest rates rising, now is the time for furniture retailers to take advantage of the strong market demand by offering retail financing. For retailers who have not yet leveraged a financing program, this is an exceptional opportunity to cultivate long lasting relationships with a young customer base.
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Furniture World News
By Mike Rittler