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Brand loyalty, basket values and big-ticket item sales: how adopting interest free credit facilities can benefit your ecommerce business

Brand loyalty, basket values and big-ticket item sales: how adopting interest free credit facilities can benefit your ecommerce business 1

By James Bradley, Director of Sales and Business Development for DivideBuy

When we compare the retail landscape on ‘Freedom Day’ to the beginnings of the Covid-19 crisis last year, it’s astonishing how much change we’ve seen in just 17 months. Seismic shifts in how we buy, what we buy and why we buy have redefined the landscape for retailers across every sector, requiring new innovations, business models and strategies to remain competitive.

One of the most significant changes that has arisen is the importance of value in purchasing decisions. Consumers around the globe are looking to manage their finances more closely than ever, with a study from the global management consultancy, McKinsey & Co, stating:

‘Given consumers’ price sensitivity, value remains the primary reason for consumers to try new brands as well as new places to shop’.

The rise in shoppers considering their purchases more carefully has developed alongside a downtrend in brand loyalty. The same report reveals that a majority of consumers in many of the world’s largest economies have changed their shopping habits since the beginning of the pandemic – and an average of 65% say that they plan to keep their new routines even after the crisis abates.

So, in a tricky new world for merchants and retailers, how can businesses buck the trend and encourage consumers to spend more and stay loyal?

Lending technology innovation is galvanising interest free credit usage

One of the solutions is to play into the shifts in behaviour, rather than railing against them. Brand names may attract sales, but increasingly it’s how easily customers can browse, pay or receive their goods that will influence buying decisions. What’s helping to drive this switch in payment behaviour is the widening range of payment methods on offer, with LendTech providers and interest free credit (IFC), for example, offering a flexible and appealing payment solution that allows consumers to responsibly multiply their spending power.

As was evident during the early months of the pandemic, consumers of all generations were investigating how IFC could support their aspirations for their homes, helping to drive sales and support businesses in what remains a tough economic climate. This has continued post restrictions being lifted, as more than half of the nation’s homeowners look to upgrade their properties during 2021, pushing the total predicted expenditure on home improvements to nearly £50bn.

Traditionally, the usage of instalment-based payment methods has always been more prevalent in the younger generations, with millennials and Gen-Z being well accustomed to such facilities through fast fashion retailers, including ASOS or Pretty Little Thing. Providing IFC to deliver financial flexibility plays a key part of the overall holistic customer experience that helps to drive sales and brand loyalty, particularly among the younger generations who are often more familiar with the concept as described earlier. Indeed, 11.5% of ‘bridge millennials’ have used IFC offerings, more than double the average adoption figures.

These payment methods are also becoming increasingly popular with older generations. During the 2020 Black Friday sales season, 42% of Gen-X shoppers (ages 40-55) had used flexible payment solutions to make their purchases, demonstrating the increasing appeal of these credit options to consumers of all ages. According to Statista, more than a third of Generation X are using installment-based payments to purchase goods, a figure that represents the priority shift of many households since the beginning of the pandemic.

One major reason for this increase is the widening availability of products such as home improvements and furnishings through flexible credit provisions. Last year, households across the UK spent an average of £4,000 on improving their properties, as funds set aside for holidays were repurposed to enhance living spaces and gardens. This rise in demand has seen a commensurate increase in the number of retailers that are offering credit solutions for their customers; in fact, more than half of the retailers onboarded by DivideBuy in the first six months of 2021 were in the home improvement and furnishing sector.

While IFC is offering older homeowners the chance to get their dream home without needing large pools of savings, for younger consumers, IFC, along with credit cards, is considered as an effective way to build their credit histories as they prepare to enter the housing market. This shows just how important it is to understand what it is about ecommerce that customers value. While many look to ecommerce as for its convenience and accessibility, it’s important to remember that it can also be used as an important stepping stone toward building a strong credit history for younger generations.

How retailers get a boost from IFC

LendTech innovations like IFC are also helping retailers to optimise and improve their own checkout experiences. Retailers are finding out that by offering options like IFC online and in-store at checkout, and making customers aware of how it works, they can experience an uplift in sales. Customers are more likely to select IFC at checkout over credit cards and other more costly payment methods.

The good news for retailers is that IFC goes even further than just securing sales; it helps to raise basket values and deliver higher turnover rates on big-ticket items. The opportunity to split the cost of larger purchases, or more items, over a set period without needing to worry about exorbitant fees provides consumers with confidence in their purchasing power. This confidence helps to drive spending, allowing customers to purchase more of what they want without worrying about suffering a big hit to their finances. For the modern customer, IFC is more than just a payment method; it’s a path to financial flexibility and freedom.

The numbers are quite astonishing. Since adopting IFC facilities as a payment option, merchants have experienced an increase in average basket valuation of more than a third, while big ticket item sales could rise up by to 43% – and all by adopting an easy to implement payment system that simply gives the consumer the choice as to how they want to spend their money. These figures are reinforced by the fact that nearly half of those who utilised IFC did so to either ease the financial burden (23%) or make it more comfortable to commit to a big purchase (19%).

Implementing IFC-based payment solutions at checkouts can also help to drive brand loyalty. Consumers are increasingly valuing their experience during the purchasing process, with a study from Walker revealing that customer experience is set to overtake both pricing and products as the key brand differentiator. Giving customers the freedom and the control over how they structure their payments with an IFC solution will be critical to providing this high-quality experience and capturing long-term customers in the digital age.

Merchants who want to compete in this ultra-competitive online space need to understand that it’s service differentiators like IFC that can make the difference between securing a sale or another abandoned basket. The buzzword for the digital buyer is ‘choice’ – and IFC plays an increasingly important role in providing this for consumers of every generation.




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