In 2020, retailers have seen a dramatic increase in consumer appetite for financing options, largely as a result of people spending more time at home and wanting to treat themselves but spread the cost to protect their monthly capital. Widespread furloughs and redundancies have also had an impact.
But during Retail Week’s latest Money Talks episode, The changing perception of consumer finance, the final instalment of a three-part video series produced in partnership with Barclays Partner Finance, our panel warned that retailers must take a responsible approach and assess whether individual shoppers can afford the options they are being presented with.
Otherwise, the chance of further looming furloughs or unemployment could lead to the bubble bursting if shoppers begin to struggle with repayments.
This was the consensus of the panel, which included Pure Electric director of public affairs Tom McPhail, Studio Retail financial services director David Twigg and Barclays Partner Finance director Richard Brassey.
McPhail revealed that purchases involving financing options accounted for 40% of the electric scooter and bikes specialist’s revenue during the first national lockdown and that while it has fallen since, it remains at 15%.
Twigg explained: “We’re seeing record demand for these financing options. The challenge we’ve got is how do we balance that demand with all the extra credit risk in the economic environment we’re seeing? The key thing we’ve been working on is how do we assess customers’ affordability.”
Brassey agreed demand for financing options is high and said “we are experiencing record applications”. However, he added that when furlough schemes end in 2021, the unemployment rate will rise and consumers may struggle with repayments. Some retailers need to change their mindset away from consumers simply being eligible to instead determine if they will be able to meet future repayments, he said, adding that this will drive a better result for everyone.
“We work closely with partners to attract customers where finance is the right option to solve their purchasing needs. Affordability is key,” he added.
Want to find out more?
The three-part Money Talks video series brings together leading retailers and brands to give you the inside track of how consumers are feeling, how they are shopping and how to win their spend.
Watch episode 1, Money Talks: Understanding consumer spending in a challenging climate, featuring Notonthehighstreet.com customer and growth director Emile Mouqot, The Very Group chief marketing officer Carly O’Brien and Barclays Partner Finance head of strategy and insight Owain Jones.
Watch episode 2, Money Talks: How to drive frictionless shopping experiences, featuring Molton Brown global customer experience director Julie Folie, Secret Spa CEO Rider Latham and Barclays Partner Finance head of business propositions Costa Stathis.