Finding the upside: Technology, relationships advance as lenders come out of shutdown period

By Joseph Dobrian, Special to Furniture Today HIGH POINT — The worldwide economic and social disturbances caused by the COVID-19 virus have depressed consumer spending in general, but finance companies report that they have managed to minimize the damage and help their partners in furniture sales and leasing to do […]

By Joseph Dobrian, Special to Furniture Today

HIGH POINT — The worldwide economic and social disturbances caused by the COVID-19 virus have depressed consumer spending in general, but finance companies report that they have managed to minimize the damage and help their partners in furniture sales and leasing to do the same.

Most financiers recently interviewed by Furniture Today agree that the pandemic has had an upside: It forced them to expedite technological advances — especially in automated communications — that might have taken them longer to develop had there been no crisis.

Companies that specialize in furniture leasing have found that slower sales have led to upticks in their business. Moreover, providers of lower-tier credit report that prime lenders’ stricter standards have resulted in small windfalls for secondary and tertiary lenders.

On the whole, finance companies agree that they are coping with the economic impact of the virus better than they might have expected, and they are forging stronger relationships with furniture stores.

Expediting advances

“In mid-March, we saw a significant drop in business, with retailers boarding up their shops and hunkering down, so we were concerned,” recalled Ryan Slobodian, executive vice president of Snap Finance. “We lost our incoming deal flow, but the Federal stimulus helped and caused dramatic activity in the paying off of accounts. Then we saw some economic recovery in mid-April. Our IT team did a great job of enabling our people to work at home. We were also able to keep funding because of strong relationships with our banking partners.

“Larger retailers were more impacted, while smaller ones were able to stay open or react more quickly. We’ve seen a large increase in new retail partners out of this, as they’ve looked for new solutions to keep their businesses alive.”

Slobodian said Snap is already comfortable with virtual meetings, and the majority of Snap’s customer contact is Cloud-based. Thus, Snap employees can work from anywhere.

“But people get lonely,” he conceded. “We did a great job of organizing meetings for games and talent shows, as well as work. My commute is my ‘alone time’ — 20 minutes of listening to music I like — and we lost those anchoring points.

“We had expected a bigger hit to consumer credit quality than we actually did see. Because of the stimulus, payment activity has been stronger than anticipated: better than 2008-09 despite a few sleepless nights.”

While the shutdown hasn’t led to any permanent changes, Slobodian concludes, it has expedited some advances in e-commerce, digital capabilities, and self-service features. Customers now have better options for making payments and getting help via virtual chats.

“We’ve taken concepts that were four years away on the horizon and brought them online in four months,” he said.

Side by side with retailers

Rachelle Knight, director of client success at Genesis Financial Solutions, said that Genesis Credit was born out of the global recession of a decade ago. So, once more, a crisis has allowed the Genesis Credit team to demonstrate leadership and quickly adapt to the changing needs of partners and consumers.

“We have exceeded expectations in innovative solutions to meet their demands,” she said. “We’ve been busy onboarding new partners: successful businesses that hadn’t previously felt the need to include a second-look solution into their financing program but that have now come to recognize the valuable role Genesis Credit plays in providing their customers with quality, near-prime financing.”

Knight said decreased sales and furloughed employees were the most prevalent and obvious effects of the shutdown, with a concomitant reining-in of approvals from first-tier credit providers. This, she said, has underscored the role Genesis Credit plays in meeting the needs of the near-prime customer.

Moreover, expansion and development of technologically advanced solutions were already underway, but the shutdown has spurred faster action in that area.

She has also seen online sales picking up steam. Retailers that don’t have second-look applications online, or an ability to transact online, are working aggressively to get there.

“We are right there, working side-by-side in true partnership with our retailers to serve customers even during these times, and that is extremely rewarding,” she said. “Retailers need lending partners who can drive approvals and provide sufficient lines of credit for customers who are ready to buy. The squeeze at the primary level has given us the ability to keep approval rates at or near pre-COVID-19 levels.”

‘Reinvent our business’

Ron Schoolcraft, vice president of business development and operations for the Acceptance Now and Preferred Lease brands, reported that while many of his company’s retail partners closed due to stay-home orders, customers continued to be able to make payments online or over the phone, which drove ongoing payment activity.

During the great recession, he recalled, lease-to-own sales outpaced general retail, and that is also proving the case in the current economic environment.

“Once retail partners started reopening,” he said, “we saw strong demand trends partially helped by government stimulus payments and supplemental unemployment insurance. Essential products increased initially, but now we are also seeing strong demand across many household product categories, and we expect strong demand for our products and lease offering as prime and subprime lenders tighten up approval rates and move back up the credit scale.

“We’ve also taken the opportunity over the past few months during the shutdown to find ways to reinvent our business. We’ve accelerated technology investments, including implementing additional payment options for unbanked customers to make payments in other retail locations.”

Acceptance Now/Preferred Lease has added new executive leadership to help drive growth, Schoolcraft said, and various changes were made to make account management more efficient and reduce operating expenses. These included temporary executive pay reductions, temporary employee furloughs and converting some staffed locations to virtual.

“We’ve been able to react faster and work smarter, and that’s helped offset some of the near-term headwinds,” he said. “We expect long-term benefits to our cost structure. We also believe that the stress on traditional retailers is enhancing our growth prospects.

“During the shutdown, we saw prime and subprime financing options in retail partner locations tighten up approval rates, sending more customers through the lease-to-own funnel and improving the quality of our portfolio. Demand for household durable goods has increased since more customers have been spending more time at home, and many customers have more discretionary income since they are spending less on travel and entertainment.”

Pace of innovation

At Progressive Leasing, Steve Surman, vice president of sales and marketing, said his main challenge was to transition Progressive’s entire workforce to work-from-home, but Progressive was able to do this while continuing to invest in core long-term strategies. He speaks highly of the ingenuity, resilience, flexibility and determination of Progressive’s retailer partners and vendors.

“COVID-19 has accelerated the pace of innovation at Progressive Leasing,” he said. “In just a few weeks in March and April, we transitioned to a virtual sales support model, including strategy and planning sessions via web conferencing and online retailer training. We also continue to enhance our e-commerce capabilities to better meet the changing needs of our retail partners now and in the future.

“But perhaps one of the biggest efforts we’ve undertaken is to leverage our U.S.-based call center talent to offer our customers a personal teleshopping service. This effort has resulted in millions of dollars in sales for our retail partners that might have otherwise been lost due to store closures.”

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