Finance platform Divido speaks about how garden retailers can increase customer base. It can also increase average transaction value and conversion rate. Should you offer interest-free financing on transactions over £150?
Divido started four years ago. Christer Holloman and his team saw a gap in the market when it came to how shoppers were being served finance.
The three selling points of Divido finance
“We have three big selling points, which are the reasons the business started,” says Christer.
“The first one is that a garden centre would link up with one finance provider. We link up withmanye competing providers of credit.
“This means that more customers get accepted for credit. The price is also lower because they compete with one another in real time.
“The second selling point is that we are omnichannel. Most garden centres aspire to offer products online as well as in store. We offer finance across all the channels they sell through.
“The third selling point, although this may not be relevant to the current garden centre market, is that we work in more than one country.
“If a business was to ship products outside of the UK there would be incumbent finance providers that wouldn’t be able to offer finance.”
Offering finance is not reinventing the wheel
Offering finance isn’t a new thing for retailers. DFS, IKEA and other stores have been offering terms for 50 years.
It’s a great way to broaden your customer base and up-sell on current transactions. It also increases the browser-to-buyer conversion rate.
“A customer could be hooked. They then think the product costs too much. Would they take product if you can give them monthly instalments?” asks Christer.
“This isn’t exclusive to Divido. Whether you work with Barclays or with PayPal Credit, these are the things you can enjoy.”
The difference between Divido and other finance, is that it offers access to competing lenders. This drives down the cost to the customer and increasing acceptance rates.
“Innovate UK, a government scheme set up by Tony Blair to help keep British inventions based in Britain, gave Divido almost £250,000. It recognised that the company was making it easier for British consumers to buy items. It allows British retailers to sell products.” explains Christer.
“For the first time, we’ve introduced competition and transparency into the finance sector.”
In the garden retail market, Divido’s customers include garden centre chain Dobbies.
Would a customer pay upfront, or spread the cost?
If a customer walks into a store and find the lawnmower they want, they will see the ticket price of, say, £500. The ticket will also state that the product is available interest-free for £50 a month over 10 months.
“If you have a savvy customer, even if they’re a millionaire, They will choose to spread the cost,” Christer says.
“The sales adviser gives the customer access to the Divido platform on a store tablet. The customer gets a text message or email, allowing them to apply on their own device while in store.
“They then get the yes or no and tell the shop adviser they’re accepted for, say, £50 a month.
“The sales adviser logs onto their own Divido system and processes the transaction.”
Once this real-time process happens, the full cost of the transaction goes straight to the garden centre.
This is one of the main differences between this platform and the more traditional finance.
“Some very traditional garden centres may have offered a customer finance or monthly instalment system. They did it themselves on a homemade system, invoicing the customer monthly. They then hope the customer pays the invoice” explains Christer.
Money up front, guaranteed
“With this solution, the garden centre gets all the money upfront, guaranteed. Whether the customer pays it back or not, the garden centre isn’t left out of pocket.”
The two most frequent questions Divido gets from retailers are about acceptance rates and costs.
“The acceptance rate depends on your customer base,” Christer says. “The less affluent your customers are, the less approvals you will get.
“The reason people go to garden centres is usually because they own their own home and want to make improvements. That’s a good place to start when it comes to creditworthiness.
“In the garden centre market, we have around a 95% acceptance rate.”
Christer tells us that the cost of the system is under the retailer’s control.
“We work with lenders and underwriters, which provide the credit” he says.
“They make money on interest, so either the customer pays for the interest or the garden centre does.
“Some retailers don’t want to pay for the system. Garden centres may have the margin to support it, but some sectors don’t.
“In that case, the customer pays a monthly interest on top of the payment.
“The garden centre is in control of this decision. If you want to increase your customer base, average order value and conversion rates to the fullest, you offer interest-free credit.
“If you start charging 10% interest, customers think they may as well buy it on their credit card.
The Divido system’s smallest transaction value is £150. The largest amount available for lending is £25,000, although the system’s transaction average is around £1,000.
The most common type of credit offered is 0% interest for 12 months. There is no application fee, no monthly fee and no fee to pay back early.
The future of offering finance
What about the future? “We currently have over 700 retailers using our system,” Christer explains. “We also want to make it a lot easier for SMEs to start using Divido.
“We’re integrating with payment providers now. There is almost no payment platform that we’re not speaking to or integrated with.”
With people using garden centres to buy higher-priced items, offering finance may be the future of the industry. Especially for these greater value products.