How to Increase the Average Order Value AOV on your store.
Shoppers looking for financing prefer researching it online with only 49% of shoppers knowing they can get financing in-store. According to 77% of consumers, financing influences where they shop.
Offering to finance is an option that large retailers have used for years to give their customers more purchasing power, encouraging larger average order value (AOV) and thus increasing revenue for the brand.
Unfortunately, smaller businesses do not enjoy the same advantage — and the same goes for eCommerce financing. Why? Because they haven’t had the means to set up a program, lend the funds, take on the additional risk and comply with consumer credit laws. As a result, they lost out on potential sales.
The average order size has been reported to increase by 15% among businesses that offer consumer credit and 93% of first-time consumer credit users said they would use consumer credit again, With 30% of the shoppers saying they wouldn’t have made the purchase at all if it weren’t for the spaced consumer financing offered.
Well with the facts listed above, it is time for small businesses to consider consumer credit for their business. Below, the latest information on consumer credit offerings small businesses can use to close the AOV gap and increase revenue via customer loyalty.
How Consumer Credit Works
New consumer credit products work a lot like credit cards. They extend a line of credit that consumers pay off over-time. At checkout, customers simply this alternative credit option instead of fishing out their credit card.
The first time your customer chooses to pay with the credit option online, they may be asked a few approval questions, and the lender gives them a decision. If approved, the transaction is processed and the sale is completed. The retailer typically receives 100% of the sale funds within a few days. From the merchant’s perspective, you’re done. The financial relationship exists directly between your customer and the lender.
Offer It and They Will Come
All the benefits of old-school consumer financing hold true for online businesses, namely enabling customers to purchase an item and pay it off over-time. For example, customers can use consumer credit to pay off large ticket items or a holiday shopping spree for a couple of months rather than in one lump sum.
The world of consumer credit comes with additional benefits, for both the consumer and the merchant.
More Sales, Larger Orders
Giving customers access to credit, including special financing offers, like “No Payments + No Interest if paid in full in 6 months,” at online checkout not only gives customers more purchasing power but also drives sales and increases purchase value. A recent Forrester study found that offering a credit payment option can produce a 17% increase in incremental sales and a 15% increase in average order value.
100% Upfront Payment
Even though your customers have time to pay for their purchases, you, the merchant, still see your money upfront. It’s a win-win situation for both the customer and the retailer in question.
Beyond just an extension of credit, some lenders will help retailers sell even more by offering their customers enticing incentives. Examples include special financing offers on purchases above a certain amount and monthly payment options over a while.
Free to Offer
While some lender programs might charge the business a monthly fee for offering credit, others are free. You just pay your normal per-transaction fee as you would for a regular sale.
If you find a fee-based service you’re interested in, think carefully about signing up. Lenders typically structure credit terms with the shopper to its own advantage. Yet, as the retailer, you are offering the lender access to a customer base in which the lender wouldn’t have otherwise gained brand exposure. Retailers here have the upper hand. Think twice about using lender programs that charge a fee.
With an average online shopping cart abandonment rate of 68%, there’s a lot at stake for online businesses to improve conversion. Giving customers the flexibility to buy now and pay later can mean the difference between a successful sale and an abandoned cart. Just remember to do your homework when choosing a credit-lending partner.