If a merchant had to choose between thinking like a guerrilla express loan banker or concentrate solely on numbers like an accountant, it’s a simple truth that thinking like a banker will yield a bigger profit and… also make customers much happier.
Thinking like an accountant means being precise and monitoring numbers. Money to me, goods to you. In essence, that’s not bad – accountant-like reasoning provides a stable footing for many a business.
An express loan banker’s thinking is vastly different. You might even say she’s walking a line. The goal is to find as many solvent people with a low credit rating as possible and offer an express loan to them. The banker knows that some customers will never repay their loans, but the payments of the honest customers outweigh the potential loss. Sometimes the risk pays off, sometimes it doesn’t.
The banker also knows how to lure customers in. The customer’s first express loan is often offered at zero interest and with a flexible payment schedule.
We recently wrote about the warnings of analysts, who forecast that the next economic crisis may stem from retail, where generously distributed credit cards pose a huge risk. Apparently the customers of stores that have closer or gone bankrupt often don’t understand why they should continue making credit card payments if the store associated with the loan no longer exists. In a nutshell, the problems in retail entail problems for the banking sector.
On the other hand, calculated risks often pay off. And that’s why Erply strives to help even the smallest of companies and the shyest of beginners. We’re also there for anybody that values out-of-the-box thinking and dares take risks, e.g. by offering store overdraft. Erply’s packages are incredibly flexible with prices for smaller companies starting at $39 per month.
Think Guerrilla!
There will always be customers that are interested in your goods but who get stuck at the price that they either can’t or don’t want to pay in one lump sum. The customer isn’t keen on taking up a bank loan either. Overdraft makes it possible to distribute the sum (for example over a year) into monthly payments.
Store overdraft not only increases sales but also customer loyalty. According to Fitsmallbusiness, direct credit increases a customer’s average purchase sum by 120% and nearly two-third of customers will make another more than $500 purchase from the store.
Erply’s software offers an overdraft solution that allows the customer to postpone payment for their purchase. The merchant gets to choose who is eligible for overdraft and who isn’t. As an added perk, the invoice can be sent to the customer’s accountant’s email directly from checkout.
Store direct credit is a growing trend. According to Divido Financial Service, the purchase financing market in the UK will increase from the current 9 billion pounds to 12 billion pounds by 2022. This is, in part, motivated by technological innovations (e.g. smartphones) that are making the process much easier for buyers and merchants alike.
The claim that only people with a terrible credit rating or minimal income apply for direct credit is not correct. Consumers and Retail Credit UK proved this concept wrong when it revealed that 59% of the respondents opted for overdraft not due to a lack of money but to have a better overview of their monthly expenses. Most did also have a credit card but preferred to only use that in case of emergencies. Granted, the sample of 798 people is hardly substantial but it’s enough to detect a trend.
What Should You Definitely Pay Attention To?
It’s important to advertise your credit option on your website and at your store – how else would customers know to ask about it? Unlike bank services, the interest on store overdraft is zero and the service fee minimal. You may also want to grant a discount on the first purchase to further increase the positive emotion.
Naturally, you can use the help of a credit company, but if you’ve got the resources and the suitable POS software, you can absolutely do it without outside help. Plus it provides a source of additional income for the store. Yes, the question of risks will come up, but start with baby steps.
If you opt for a credit company, make sure that the company’s terms and conditions don’t suffocate your business. You may come across deals where the customer gets a great interest but the merchant has to pay 10% commission. That would mean that you only earn $900 off a $1,000 deal.
Naturally, there are a number of questions you need to ask yourself.
- How to verify the accuracy of the data submitted by the customer (income, place of residence)? Is the collection of data in line with legislation? How high should the income rate be? If you set the bar too high, the credit system set off. If you set it too low, it’ll attract fortune hunters who have no intention of paying back the loan.
- Secondly, are you sure the customer understands when the repayment deadline is and what the individual payment sums and interest are? How will you monitor the customer’s payments? How will you send reminders to those that have fallen behind on their payments? And what to do with those that refuse to make payments altogether – will you pass their debt to a collection agency or try other means?
How Can Erply Help?
One option is to base your decision to grant credit on the customer’s purchase history. But is your POS software reliable enough to adequately display how often and how much a given person has purchased?
Erply’s software displays a customer’s purchase history at the checkout. If you click on the customer’s name, the program will display the customer’s overdraft, available bonus points and the frequency of visits to your store (clicking on this will open a list of transactions that can be viewed in more detail) on the customer’s profile.
Obviously you should take great care deciding how granting overdraft will affect your business as a whole. Problems with payment accruals can have a detrimental effect on your company.
But, like we said – one step at a time.
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