Marc Barnes
Finance still an important selling tool, but many prefer to stress selection, value

HIGH POINT — No money down. No interest. No payments.

For years now, furniture retailers have promoted “no, no, no” financing programs as a way to get customers in the door and move product out. Some still actively promote these plans, while others have backed away from them in favor of new marketing strategies.

Retailers say that a number of factors figure into the decision on what kinds of financing to offer. They include the types of customers that retailers are targeting, relationships with financing sources, and the overall competitive environment that retailers operate in, especially any fear they may have of losing market share to competitors who are more aggressive with financing.

Clarence Smith, president and CEO of Havertys, a 119-store chain headquartered in Atlanta, said he uses financing to keep his stores in the game, not to drive business.

“Less than half of our business is credit, so it’s not the main thing that it is with some other companies,” he said. “The furniture is the star, and we try to provide the fashion and the quality level that is right for our customer.

“Credit is part of (the equation), but for our customer, it’s not the most important part.”

Smith points to Havertys’ advertising, in which price and financing terms stay in the background while the furniture is positioned front and center.

“That’s what we believe in, and that’s what our customers are telling us that they want,” he said.

Robert Capo, chief marketing officer at El Dorado Furniture in Miami, said that finance companies generally have backed away from the aggressive financing approaches of the past to a model in which customers now are required to make at least a minimum payment each month.

“They are finding out that customers do not have (funds) two years from now when they are making their first payment,” and often end up defaulting, he said.

With the new approach, “If they have bad credit, even if it has been approved, they discover that in the first couple of months and they don’t have to wait a year or whatever the term is.”

The advantage to the retailer is that with a minimum payment, the rate is more attractive, Capo said.
“We are saving some money because customers are paying less of the finance charge and that is making the deal more attractive,” he said.

To drive customer traffic, El Dorado has switched away from stressing financing.

And it doesn’t run sales with percentages off the retail price. Instead, the advertising appeals to the status of owning furniture that is both fashionable and a good value.

“The first thing is that they have to like it,” he said. “If they don’t like it, they won’t look at the price. Nobody buys a price tag.

“You show the furniture first, and then give them the price. You don’t barter with price first and then try to sell the furniture.”

Ann Navarra, vice president of Jerome’s in San Diego, said that market pressure in her area has meant that the “no, no, no” model is still in place. But she fears that the effectiveness of that pitch as a sales lure is becoming diluted.

“The person who is in the market to buy furniture is going to pay attention, otherwise no one is going to pay attention,” she said. “We have been doing this for years. We advertise heavily on television and in the local newspaper.

“Everybody is using the same promotions. It is (for) that customer out there who does not listen to commercials until they are ready to buy furniture.”

Some retailers, Navarra said, are running aggressive promotions beyond financing, which include no sales tax.
“We look at our profit margins very closely,” she said. “We do an ‘either, or,’ but we can’t give it all to them with our prices.”

She added that she doesn’t know what the next development in furniture financing will be, but that a better message would be to stress fair pricing, quality and service after the sale.

“People today are so busy, so tired of getting the runaround,” she said. “They have so many things on their plate every day and they want to be assured when they are going to make a purchase, that the company is going to do as agreed and give them good service.”

Sam Fishbein, CEO of Kacey Fine Furniture in Denver, said his business is in a similar situation, with other stores in the marketplace still trumpeting the “no, no, no” message. He agreed that this pitch isn’t as effective as it used to be, and that it’s time for an alternative.

One proposal currently under discussion by industry leaders is a plan developed by City Furniture’s Keith Koenig in which new homebuyers would be able to finance new furniture as part of  their mortgages.

But Fishbein said there are some problems with this model, given the differences in how real estate and furniture are financed.

Fishbein said the furniture industry is in a period of uncertainty.

“There is a disconnect with the consumer, and when there is confusion in any market, people will go to the lowest common denominator,” he said.

At American Furniture Warehouse in Colorado, Andrew Zuppa, corporate general manager and marketing director, said that the Top 100 company has built its success by keeping its financing pitches short and simple. It offers a three- to six-month financing program but doesn’t rely on credit to build sales.

“If the only thing you have is financing, then that is the only thing they will buy,” said Zuppa.

A better tactic, he added, is to put a product before the consumer that they like, sell it at the best possible price and provide assurances that the store will be there when the customer is ready to buy.

With that approach, American Furniture Warehouse grew by 10% last year, at a time when the economy in Colorado wasn’t the best and a number of its competitors were exiting the market.

“Financing is a short-term fix,” he said. “Believe me, I understand the appeal. But once you head down that road, you never get off and you train customers that this is how they buy from you.”