Insight: retail finance hits the mark for shoppers
According to data from Close Brothers Retail Finance, Londoners spend more on average on point of sale finance than any other region, spending a total of £1,001 a month.
Close Brothers has highlighted ONS figures which show the highest proportion of transactions, 15% of the UK total, are made by people in the South East. Despite Londoners and those in the South East having the highest and second highest levels of disposable household income in the UK, they are still opting for point of sale finance over other options.
According to a survey from Close Brothers Retail Finance of 500 retailers across the UK, 63% of SME retailers think there are no benefits to finance, and only 5% offer it. This is in contrast with Close Brother’s figures which show that over half of customers who buy using retail finance would have bought elsewhere if it had not been available, and almost three in five stated that they only bought because retail finance was available. Retailers have also reported up to a 30% increase in sales when offering finance as an option at the checkout.
Close Brothers has also highlighted how consumers spend on average over £100 more a month when products are interest free. One in seven retailers said it creates a demand for more expensive goods and one in six said it benefits the customer by giving them more payment options.
Around one in five retailers think customers would not want to take on debt from retail finance, but Close Brothers argues that shoppers have adopted a ‘pay as you use’ attitude and are comfortable with paying for things over time.
Alex Marsh, managing director Close Brothers Retail Finance, said: “There are many myths that exist about point of sale finance – that it is just used by low income households or that people are reluctant to use it compared to other forms of finance such as credit cards. These are simply not true. Our research shows that it is shoppers in high income areas of the UK who are most likely to use this type of finance. Many of these purchases are on 0% interest monthly payments, and it appears many consumers are interested in using point of sale finance as a financial planning tool to spread the cost in a structured and easy to manage way.
“In the context of a highly competitive retail market and with volatile consumer confidence, retailers are beginning to recognise that offering finance options brings significant benefits, from customers spending more in a single transaction, to speeding up their purchasing decisions by allowing them to spread the cost through agreed monthly payments. The application process and the product are extremely straightforward for retailers of all sizes to put in place, and can help retailers unlock their potential sales growth by offering customers a convenient and more affordable purchase.”
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