A Forrester Research report analyzes the early successes and failures of Apple’s mobile payments system.
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In addition, BlueNile accepts bank wire transfers of money from a customer’s checking account directly to BlueNile’s account. “Bank wires work great,” Irvine says. Not only does BlueNile get its cash immediately, but wire transfers tend to support larger-than-usual purchases by consumers who don’t want to incur finance charges on, say, a $10,000 diamond ring. As an incentive to get customers to use bank wire transfers, BlueNile offers a 1.5% discount above and beyond other special promotions.
BlueNile is a privately held company and doesn’t break out specific financial numbers. But Irvine notes that the bank wire transfers and the MBNA financing each accounts for about an equal amount of consumer purchases, and that both are growing at the same pace as the retailer’s overall 80% growth this year.
She adds that the financing options help to make BlueNile’s products--the average purchase price is $1,000, though diamond rings can run $40,000 or more-accessible to a larger number of consumers. “The offers certainly widen our target audience,” Irvine says.
BlueNile’s financing options play a key role in building a stellar customer service experience, she adds. “From the time customers first come to our web site, we want them to feel like it’s a good experience,” Irvine says. “If we can continue that great customer experience, people will continue telling their friends about us. We want people talking about us in a positive way.”
Many BlueNile customers are men who don’t often buy jewelry, but want help in picking out a high-priced item like a diamond engagement ring. The financing options serve as an extension of that personalized customer service, Irvine says. “By offering several payment methods, we let them choose the method that’s right for them,” she adds.
She figures that, when a first-time customer purchases a low-end product, he’ll notice and remember the special financing terms for later, larger purchases. In other cases, first-time customers are lured by the financing to purchase a high-ticket item. “We want customers to have a number of choices in how to pay, so they’ll consider more products,” Irvine says.
Special credit in moderation
Special financing follows another approach at QVC.com, the online version of QVC Inc.’s televised QVC shopping service. QVC.com’s special financing offers are used occasionally to boost sales of a particular product or category. “We use it infrequently, because we don’t want people to get accustomed to it,” says Dave Balliet, vice president of inventory planning and merchandise operations. For instance, QVC will also occasionally offer to defer all payment on a promoted product until a pre-set date, though this option is only available to holders of QVC’s private label Q Card credit card. “It’s a successful strategy when used in moderation,” Balliet says. “It allows people to bring into their homes products that they might otherwise not.”
Getting the full view
Prompting sales may be the primary use of a proprietary card, but in today’s multi-channel environment, retailers can’t overlook the 360-degree view of a customer’s behavior that a proprietary financing vehicle can provide, says Anderson of Macys.com. “We can store both their online and offline transactions to see their cross-channel behavior, which supports the fact that customers that shop in multiple channels spend more overall,” he says. He adds it would be possible but more difficult for Macy’s to store and analyze shopping transactions made with general purpose cards, since Macy’s doesn’t control the card transaction data.
Anderson says Macys.com has no plans to extend credit beyond credit cards, such as through installment loans or electronic checks-an approach that can widen a customer base beyond holders of credit cards. “My strategy is to pursue customers by income type and demographic that would typically carry credit cards,” he says.
Retailers who want to offer alternative forms of credit needn’t take on the financing and management burden themselves, however. Another payment option is Bill Me Later, a cardless payment system that lets consumers pay under an installment plan. Figuring there are still many consumers who prefer not to use credit cards for online purchases, Buy.com Inc. began offering the Bill Me Later service last fall.
While Buy expected customers to appreciate the alternate means of financing a purchase, it was surprised when the service became an effective tool for acquiring customers and driving up the value of purchases, COO Brent Rusick says. “The vast majority, or over 70%, of customers who buy using Bill Me Later are new customers,” Rusick says. “We’ve found it to be a great customer acquisition tool.”
In addition to serving as a customer acquisition tool, Bill Me Later also provides Buy.com with a more flexible means of offering special financing promotions, such as offering TVs or computers with no payments or interest for six months, Rusick says.
Rusick adds that customers who purchase with the Bill Me Later feature, which is offered through CIT Bank and managed by I4 Commerce Inc., make larger than average purchases. Rusick says he figures that’s because some customers who want to purchase products, such as big-screen TVs for $1,000 or more, often don’t want to risk using their credit cards online or pay credit card interest.
To use Bill Me Later, shoppers click on the Bill Me Later option at checkout, input their personal data and billing information, then wait for an authorization that takes about the same time as a credit card authorization, Rusick says. Shoppers pay for products through monthly installment payments on a line of credit approved by I4 Commerce.
Jeff Foster, executive vice president of London-based Retail Decisions plc, a data processing and consulting firm that helps retailers get connected with Bill Me Later, says that most consumers who use Bill Me Later have credit cards but prefer not to use them for online purchases.
Alternative credit is not the only form of alternative payment, however.
E-retailers, including Wal-Mart Stores Inc.’s WalMart.com, have begun accepting other means of payments such as electronic checks, which proponents say can serve the 40% of consumers who either have no credit cards or are maxed out on them. Certegy Inc.’s Certegy Check Services division is providing the e-check processing system for WalMart.com