Finance At The Forefront Of Home Improvement Retailing

By Brian Flesk, Head of Retail at Novuna

UK households purchase over 7.6 billion pounds worth of DIY products each year. It’s a competitive sector with non-specialists growing their market presence and home improvement retailers are rightly looking at ways to stay one step ahead. 

As the Golden Quarter looms with consumers showing renewed confidence in the UK economy, it's key that retailers find ways to strengthen their value propositions in order to enjoy a bumper trading period.

Benefits of offering finance

Home renovation projects can be an expensive venture. One of the key ways retailers can outperform competitors is by offering customers the chance to spread the cost of their purchase.

Point-of-sale finance plays a crucial role in attracting and converting browsers into buyers, while also helping to enhance average transaction values in the process. Finding ways to differentiate and enhance their multichannel offerings is particularly important for home improvement retailers who are vying for customers in an increasingly fragmented market.

As one of the UK’s leading providers of retail point of sale finance, working with over 600 home improvement retailers including some of the biggest brand names through to niche online ecommerce retailers, we’ve seen business volume across the home improvement sector increase YOY.

Boost sales

The option to pay using point of sale finance can be a valuable marketing tool, driving footfall in-store and traffic online, accelerating purchasing decisions and converting sales.

It allows customers to spread the cost of their purchase, which can give them access to a big-ticket item that they might not otherwise be able to afford. 

Our home improvement retailers have kept interest free credit and buy now pay later as the main headline offer, but we have seen a shift in recent months towards low-rate interest bearing credit to support retailers’ margins. In fact, the penetration on low-rate interest bearing credit has increased by around 15% in the last six months.

There’s no reason for customers undertaking DIY projects not to take retail point of sale finance. It just gives them extra breathing space and an opportunity to spread the cost. Our own data shows 48% of home improvement customers cite finance solutions as the key reason for completing the purchase of a big-ticket item.

Increase average transaction values

As the customer will be spreading the cost rather than having to find hundreds or even thousands of pounds upfront, they often also feel more comfortable upgrading their purchase or adding an extra item to their order all while adhering to their monthly budget.

Indeed, within the home improvement market, Novuna data reveals that over a third (37%) of customers state they spend more on items when finance is available, confirming the crucial role point of sale finance plays in enhancing average transaction values for retailers.

Through our max loan product, customers have the opportunity to understand their full borrowing potential. This gives home improvement retailers an ideal upsell opportunity, as customers can automatically access additional finance without needing to reapply.

The majority of all accepted customers within the last 12 months were also offered an increased loan amount, potentially allowing them to expand their budget to undertake entire projects for their homes, rather than limiting themselves to one-off purchases. That’s ideal in today’s current climate when customers may be opting to stay put and focus on investing and renovating rather than move home.

Reach more customers and avoid abandoned baskets

To address the decline in discretionary spending of recent times, we’ve rolled out a unique package of smart, bespoke credit options, with numerous tailoring options, empowering home improvement retailers to create tailored finance deals for their customers.

Our soft search, instant decisioning and unique loan tailoring options accelerate purchasing decisions and minimise customers from abandoning a potential sale at the final stage of the transaction process.

With the immediate availability of soft search, customers can check their eligibility for finance with no impact on their credit report. They’ll shop with more confidence if they know they’re going to be accepted for their preferred finance option.

Our market leading accept tailoring functionality is making a huge difference to our home improvement retailers’ margins, turning declines into accepts by suggesting a lower loan amount, longer term or higher deposit. Or we can lower the cost of borrowing by reducing their loan term. These bespoke options not only allow customers to create a payment plan that suits them, but can also enable retailers to benefit from lower subsidy costs. 

Strengthen brand loyalty

Good experiences stay at the forefront of a customer’s mind when making another purchasing decision.  Offering finance through a reputable provider strengthens brand loyalty with existing customers, giving them yet another reason to return when they they’re shopping for DIY products to improve their homes.

Supporting retailers to create a great customer experience at every touch point to meet modern shopper demands is why our award-winning customer service is accredited by the Institute of Customer Service.

The Golden Quarter is a prime opportunity for home improvement retailers to increase revenues as 2024 draws to a close. Now, more than ever, ensuring retailers have the right tools in place, with a range of flexible finance solutions to meet consumer demand will be vital in order to stay one step ahead in the home improvement sector and drive sales in a competitive market.

Source : Brian Flesk, Head of Retail at Novuna

Image : Fenton Roman / iStock / 1646081497

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