Article

Instant credit kiosks increase average retail ticket

By allowing customers to apply for private-label credit before they begin shopping, instant-credit kiosks are raising the average ticket for big-item retailers — by as much as 30 percent.

October 30, 2006 by James Bickers — Editor, Networld Alliance

Ask any young couple buying their first living-room suit together: There are few things more nerve-wracking than sitting in the little booth at the back of a furniture store, waiting to hear if you've been approved for the "90 days same as cash" deal that beckoned you from a newspaper ad.

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"We felt this was more customer-friendly, and put the customer more in charge," Wolf said. "Plus, if they're not approved, there's no embarrassment — they don't think, ‘Oh, I can't go back into that store.'"

In-store financing is a mainstay for big-ticket retailers; although many of those retailers no longer operate their credit programs in-house, having sold their receivables portfolios to big names like GE Consumer Finance, Citi and HSBC, the private-label credit market in the United States still tops $100 billion.

Human nature says that if you give a person $1,000 in credit, he will look at items in that price range; if you give him significantly less, or significantly more, he will adjust his browsing accordingly.

Therefore, it makes sense to give the customer an accurate line of credit before they begin shopping, both to minimize their frustration and to maximize the possibility that they will spend more.

"Over 90 percent of our credit applications are done through the kiosks," Wolf said. "We've had a favorable result with increased average ticket. That's what this was all about — Will she spend more if she knows what her line is prior to purchase? We've found that the answer is ‘Yes.'"

A customer uses a Showroom Technologies kiosk at an Ashley Furniture location in Jacksonville, Fla.

Another company providing self-service credit application is Showroom Technology, which has been in business almost three years, deploying kiosks built by Olea Exhibits/Displays Inc. with software by Apunix. Chief executive David Weyher said his company's SHOW/PRO kiosk allows a retailer to accomplish three things: deliver instant credit, collect customer data for contests and promotions, and deliver advertising messages on the kiosk's attached display.

Although his business is "95 percent in home furnishings," he has his eyes on electronics stores and jewelers and possible grounds for expansion. Like Wolf, his retailers have seen average ticket growth — anywhere from 15 to 30 percent.

"That's huge," he said, "because they have the same fixed cost base."

Plus, Weyher said the self-service approach to credit application naturally results in not only larger ticket size, but also more credit customers.

"By the very private nature of a kiosk, you're going to get more people," he said. "You get more people willing to give sensitive data to a machine versus a human being, thereby getting more people to apply, thereby getting more applications approved."

Weyher said retailers pay anywhere from $400 to $600 per month to rent a kiosk, based on a 36-month lease. That price includes all required services and maintenance; the retailer just provides a broadband connection. The company claims a return on investment in "just a few months."

"Instant-credit kiosks are the real deal," said Summit Research Associates president Francie Mendelsohn. "People like them because they are saved any embarrassment if they are turned down, and when they get this ‘wad' of cash, they tend to use it right away."

A screenshot from Apunix's credit-application software.

"The key to it is, you're changing the paradigm of buying for the customer," she said, referring to the traditional shopping process that involves selection first, financing second. "If you have no credit available, you've wasted the salesperson's time, and you're a pretty unhappy customer leaving the store — you've selected all this stuff, and you can't have it. And if you have more credit available than you thought, you're not likely to go back and do more shopping — so the store has left money on the table."

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