Providing financing options for major purchases can be a key driver of sales for retailers, according to TD’s latest Retail Experience Index, a bi-annual survey that tracks purchasing habits, particularly when it comes to big-ticket items.
The survey polled around 1,000 Americans who made a major purchase in the last year, defined as spending $500 or more on a single item. It found that 70% of consumers are likely to make a large purchase in the next six months, and a third (31%) expect to spend more this holiday season than they did last year.
This anticipated spending creates opportunities for retailers with robust financing programs to capture market share. According to the findings, one in five (21%) consumers said they financed their most recent big purchase, and of this group, 92% said the retailer’s financing program was an important factor in proceeding with the purchase.
The survey found that financing options are a significant consideration when shopping for a major purchase. Nearly half (46%) of consumers report they are more likely to purchase from retailers who offer a variety of financing options, such as installment loans, buy-now-pay-later solutions (BNPL) and store-branded credit cards. Another 78% said the ability to finance affected the amount they were willing to spend.
“Financing options are no longer viewed as a perk for shoppers when selecting a retailer for their next big purchase, but rather a key differentiator in where they buy these goods,” says Mike Rittler, Head of Retail Card Services at TD Bank. “As consumer preferences vary and evolve, it’s important for retailers to not only offer financing, but a variety of options to meet their customers’ individual needs, and ultimately increase repeat business.”
With more options available than ever, consumers are taking advantage of both short and long-term financing:
For consumers who anticipate increasing spending during the 2021 holiday season, more than a third (34%) expect to increase spending on updating and outfitting their house to host holiday festivities.
The survey also captured an overall surge in home improvement spending sparked by the pandemic. Home-based products made up a strong percentage of large purchases during the past year, with electronics and music equipment (43%), home appliances (39%), furniture (35%) and home improvement items (35%) as the top spending categories among consumers surveyed.
It’s well understood among retailers that maintaining a strong online presence is essential, and this became even more critical during the pandemic. Eighty-one percent of consumers shifted a portion or all of their shopping online during the pandemic, and 32% expect to do more of their shopping online moving forward.
Additionally, amid ongoing COVID-19 concerns, 44% of consumers report trying to minimize their time in stores, and about half (52%) said they would prefer to use contactless technologies to place and finance purchases, rather than speaking with a person.
“The shopping experience is evolving, and retailers are tasked with providing their customers with a fully integrated, cohesive experience that easily translates from online to store,” adds Rittler. “Many retailers have invested in contactless financing, virtual showrooms and robust online customer service to provide the most seamless and safe experience possible across channels.”
A retailer’s website also plays an important role in the research phase by allowing shoppers to explore products and financing options, even if they ultimately purchase in-store.
The survey found that a third (31%) of consumers said the retailer’s website was the biggest influence in their decision making for their last major purchase. This marked the first time the online channel overtook brick-and-mortar stores as most influential in this question’s responses. And 41% said they prefer to browse and research products online and then purchase in-store to minimize time spent in retail locations.
With these findings, delivery time has become increasingly important as well. Ninety-one percent of consumers say that they’re more likely to purchase from a retailer who can deliver more quickly.
“As retailers navigate ongoing supply chain challenges, they must anticipate customer demand and ensure their stock inventory is consistent with online offerings,” said Rittler.
The full report can be found here: TD Bank’s Retail Experience Index
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