The Tried and True Benefits of Retail Credit

Written by Chris Kirk

May 4, 2020

We’re not re-inventing the wheel or introducing a new, innovative payment method. Private Label Credit Cards (PLCC), or retail credit, has been around forever. And for good reason: It works! Let’s look at some of the major benefits of PLCC vs your standard VISA/MC/AMEX transactions. 

Higher Average Tickets. Looking at data from a portfolio I help manage, bank card transactions (VISA/MC) in the Major Appliance, Consumer Electronics and Furniture industry average around $700 per transaction. Compare that to an average transaction of $2,100 on customers using their PLCC. The proofs in the pudding customers are significantly more likely to spend more when they can spread those payments over six, 12 or 18 months. PLCC sales also gives your retail sales associates a much better opportunity to attach high margin services to the ticket (extended warranties, installation, etc.). 

Repeat Customers. According to a recent study from Synchrony Financial, 68% of PLCC cardholders said they plan to use their card again in the future. So, not only will customers spend more in your store, but they also plan to (and will) come back and use that card over and over again at your store.  

Marketing Opportunities. This is probably one of the most under-utilized features of a PLCC program I see today. Once a customer signs up on your retail credit program, you have a guaranteed touchpoint with that customer on a monthly basis (as long as that customer has a balance). The credit card statements those customers receive, either online or through snail mail, give you the ability to easily promote new offers and/or remind them of available credit they have – at no additional cost to you. Where else can you market to and keep your name and brand in front of your existing (and historically best) customers on a monthly basis; a customer that has available credit and money to spend, at no cost? 

In addition to this free marketing, most PLCC providers allow you to easily pull a report that shows a list of all customers (inclusive of current/accurate mailing address or email if customer elects). This report will show you, by customer, available credit they have to spend IN YOUR STORE.  

I often help my customers use this list for direct mail or email “Open to Buy” campaigns that feature an offer either finance offer or product offer and show that customer the dollar amount they already have available to make another purchase in your store. When we include this information on the marketing piece, we see approximately a 3% response rate on these campaigns compared to <1% on traditional direct mail offers. 

Increased Close Rates. Another survey by Wells Fargo tells us that 89% of cardholders say that financing made their large purchase more affordable. To further support this, a recent study from the Federal Reserve Board shows us that four in ten adults would not have available cash if faced with a $400 emergency expense. Financing these often-unexpected purchases makes these, sometimes required, purchases more palatable and budget friendly.  

Lowered Expenses. If you haven’t checked PLCC rates recently, it’s definitely worth your time to do so. You can lower your credit card processing expenses when you use your PLCC as payment method. This will largely be determined by which term (six month, 12 month, 18 month, etc.) you are offering. The longer the term, the higher the discount on the amount you’re charged. But you can expect for a six month “No Interest” promotion to only charge you around ~1% versus a traditional credit card (VISA/MC/AMEX) discount of nearly double that. 

For even more savings, you can also find substantial savings for your PLCC discounts/processing fees through a buying group affiliation like Nationwide Marketing Group. These groups often aggregate their Members purchases to negotiate the very best rates and offer even lower rates for vendors they work with. 

I recently saw a motivational quote at the gym: “Once you see results, it becomes an addiction. I couldn’t help but think about how this applies to so many aspects of life and business. If you don’t have a retail credit offering program, get one. If you do, push (and reward) your sales associates to promote and offer your PLCC with every sale. The results will speak for themselves.

This article was first published in the April 2020 issue of The Retail Observer.


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