It’s an exciting time for e-commerce retailers as technological innovations have changed the industry. Product sourcing and shipping modernizations have created a very efficient logistics process that in many ways is turnkey and delivers a great customer experience. As entry level barriers have been removed to invite new e-commerce retailers, competition has increased significantly.
While most retailers focus on social media marketing, SEO best practices and expanding marketplace relationships to achieve strategic growth targets, there is a tendency to overlook best practices that serve traditional brick-and-mortar retailers well — in particular alternative payment methods and underserved customer demographics.
Over the last 15 years, traditional brick-and-mortar retailers have identified a significant segment of business that traditionally goes underserved due to the inability to be approved by a prime lender. Typically, retail stores would offer layaway programs to customers who could not get approved through primary credit methods, which led to wait times of 90 days or longer. This opened the door for secondary and tertiary lenders to offer financing and alternative finance products that give customers access to the goods they wanted and needed without the restrictions of a layaway program. As alternative payment methods continued to grow, more lenders began to enter these retail markets that ultimately benefited consumers. This allowed lenders became more competitive in their offers to consumers.
E-commerce retailers have identified the need for a prime finance solution and, in some cases, they offer secondary lenders. Offering a prime finance solution is a great way to build cart values and increase retention rates especially for repeat transactions. However, many subprime customers are not aware of the variety of options to transact online and surrender to clunky, unfriendly options. This is changing as new processes are being introduced to e-commerce retailers, raising the bar and customer expectations for a seamless experience.
Let’s look at some of the best practices changing the way e-commerce retailers are approaching online payment methods:
- Prime finance: Prime credit offers grant consumers with good or excellent credit access to your products. Prime credit cards can be white labeled with your company name and usually do not require security deposits, have lower (or no) application fees, carry low interest rates and offer rewards programs and other benefits. Unfortunately, you may not access your entire customer base due to FICO scores.
- Secondary finance: Secondary credit is a great solution to capture customers declined by prime finance offers and serves customers with good or average credit scores. Secondary finance can also offer white label credit cards with similar benefits as a prime credit solution. Interest rates are higher than prime finance but might offer no interest promotional periods that are attractive to customers.
- Tertiary and lease to own: Tertiary or lease to own companies are a valuable tool for consumers short on cash or credit to gain access to your products when declined from primary and secondary lenders. Lease to own solutions continue to grow with e-commerce retailers because of the significant number of declined applications from prime and secondary lenders. Many lease to own companies offer 90-day, “same as cash” terms and flexible repayment terms.
Introducing multiple payment options can help your website serve an expansive customer base and bring a significant lift to your sales volumes. Your website should be optimized to determine where to place these solutions to create a controlled and efficient process for your customers. New technologies have given e-commerce retailers multiple options for lender placement, such as the following:
- Checkout buttons: Simply adding a checkout button allows the customer to choose various payment methods a la carte and is commonly used, but in some cases, the customer may not see these options until they’ve added to their cart and proceeded to check out.
- Finance page: Finance pages are an easy way to show your payment options and are simple to set up but can introduce application fatigue if the customer must go back to the finance page each time to reapply.
- Multi-lender waterfalls: One trend that has a lot of traction in the finance industry is multi-lender waterfall technology. With a lender waterfall, you can create a seamless application from primary to secondary to tertiary lenders. Waterfalls maximize approvals and sales and provide payment settlements and valuable reporting that can help e-commerce retailers optimize the customer experience.
- Unified commerce/Omnichannel: New technologies allow customers to shop online, in-store or on marketplaces and provide multiple revenue channels for retailers.
Ultimately limiting the payment methods and processes limits your access to a large demographic of underserved customers. As you create growth plans for Q4 and 2020, adding new payment solutions and processes should be an integral part of your growing e-commerce strategy.
According to FlexShopper, over 50 million customers in the US are seeking alternative methods to make purchases? In a recent webinar, FlexShopper described how you can reach more customers and increase your marketplace sales with its omnichannel payment solutions. Watch it on-demand now.
Guest blog post by John Brann, vice president of retail partnerships at FlexShopper. John has spent the past 20 years helping retailers expand customer access with alternative finance and lease-to-own products for e-commerce and in-store channels.