Retailers are failing to see the benefits of offering finance and are losing out on sales, an expert has warned.
A recent survey of 500 UK retailers by Close Brothers Retail Finance revealed that 63 per cent of retailers believed there were no benefits to finance, and only five per cent were currently offering it.
However, Close Brothers argued that customers spend on average £100 more a month when products are purchased on interest-free credit.
Londoners spent more on average on point-of-sale finance than any other region, with a total monthly spend of £1,001. The highest proportion of finance transactions were made by people in the South-East (15 per cent), despite Londoners and those in the South-East having the highest and second-highest levels of disposable income in the UK.
Over half of customers who bought on finance said they would have bought elsewhere if it had not been available and 59 per cent stated that they only bought because retail finance was available.
Retailers also reported a 30 per cent increase in sales when they had offered finance as an option at the checkout.
One-in-seven (13 per cent) of proprietors also argued that it created demand for more expensive goods, while one-in-six (17 per cent) said it benefited the customer by offering them more payment options.
One-in-five retailers thought customers wouldn’t want to take on debt from retail finance, but Close Brothers argued that shoppers had adopted a ‘pay as you use’ attitude.
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 with other forms of finance, such as credit cards. These are simply not true. Our research showed that it was shoppers in high-income areas of the UK who were most likely to use this type of finance. Many of these purchases were on zero per cent interest monthly payments, and it appears many consumers were 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.”