Despite fears about the credit crunch, retailers are still using credit to drive sales – especially in the struggling big-ticket market. Liz Morrell reports

As banks show signs of tightening their lending criteria, many retailers, it seems, have not been deterred from pushing their in-store credit offers.

Earlier this month, for instance, Dorothy Perkins was heavily promoting its store card, run by GE Money, across its in-store tannoy system. Mothercare is also continuing its active promotion strategy – customers are asked at every purchase if they want to open an account card.

Despite concerns among other lenders, many believe in-store consumer finance provides a wealth of opportunity to retailers. Martin Cutbill is chief executive of finance and insurance services at Hitachi Capital, which provides point of sale instalment credit for retailers. “If people are finding it more difficult to borrow, that is good for a retailer with in-store finance,” he says. “Consumer finance is a very popular product when you go into an economic downturn, because it’s one of the stimulus that can help customers make a purchase they may otherwise have deferred.

“It also allows the retailer to sell more expensive products than it may have been able to before,” he adds. This is especially true if the retailer is offering 0 per cent credit, which stimulates sales growth because it is at no extra cost to the consumer.

Aurum Holdings, which comprises Goldsmiths, Mappin & Webb and Watches of Switzerland, uses Hitachi to offer 0 per cent finance to customers. Karen Little, head of Aurum Holdings’ store finance helpline, says staff are trained on when to introduce it in the sale, how to use it as a sales tool and how it can help up-sell.

Layton Wilkinson, director of partnership at Laser UK (formerly Creation), which has both a store card and an instalment credit business and works with retailers including Focus, Land of Leather, ScS Upholstery, Adams and JJB Sports, agrees that consumer finance can be beneficial in the present climate. “The way the market is moving at the moment, a lot of retailers are struggling to move larger items.

“We have been helping retailers to market the finance options and change the package to help suit their customers,” he says. This has involved changing the mix of credit options and payment terms available, as well as ensuring that credit options are communicated to the customer more clearly.

Communication is essential, says Wilkinson. “There is a lot of inertia around credit at the moment. We have been going out to stores, helping retailers to understand credit even better by training their staff. It’s not about heavy selling to the customer, but about staff having the knowledge to explain the finance options,” he says.

In-store finance also brings a wealth of customer data that can be exploited. “We can market offers or preview evenings, which will help drive footfall but, because they have a store card, that enables the shopper to be able to pay, too,” he adds.

Hitachi carries out customer profiling for retailers from the information on its database – information that can then be used for retailers’ own marketing purposes to attract similar customers.

In a store card or retailer-branded credit card operation, a customer’s monthly statements provide an extra channel of communication. “We do a lot of direct mailing to our cardholder base through statement messaging,” says Alison Wilcock, JJB Sports senior marketing co-ordinator. “We are constantly updating them with new product and ranges information and also offer incentives to encourage them back in-store with money off [offers]. It’s a good marketing tool for us and is also good to help keep those customers as loyal to the brand as possible – especially in this climate,” she says.

Instalment credit customers can be targeted too. Hitachi runs a marketing programme called Fastrack, in which it writes to customers just before their last payment is due, offering them a discount if they come back to the store.

Aurum Holdings uses this service. “Customers will get a letter upon their penultimate payment that will invite them back in and offer a 10 per cent discount if they take out another interest-free agreement,” explains Little. In December alone, that tactic generated about£21,000 of additional sales, she says.

But retailers shouldn’t just rely on their finance partners to drive sales. Wilkinson says: “It’s not just about money-off offers. Retailers have to be innovative and give exclusivity on offers. They have to communicate with us about what they are trying to achieve. We can put out 10 per cent off offers every week, but that’s boring. It’s about making the customer feel special and part of the club,” says Wilkinson.

And retailers could also do more with the information on offer. “Retailers are potentially missing a trick by not using the power of the information we gather from customers who have a finance agreement – you can produce a more targeted marketing campaign than a general TV campaign,” he adds.

The market is changing. “People may traditionally associate finance with the electricals and furniture market, but it can be for any retailer that has high-ticket items over£500,” says Cutbill.

JJB Sports offers instalment credit on more expensive items including golf clubs and high-end fitness equipment, such as running machines. JJB Sports finance director David Greenwood says: “We don’t have as many big-ticket items as an electricals or furniture retailer, but we do have some and this makes it easier for the customer.”

Credit offerings may be getting a bad press at the moment, but this does not always translate for in-store finance. Clever marketing means in-store finance can help retailers to know their customers better, as well as increase sales of big-ticket items that might otherwise be left on the shelf.