September 21, 2012, 9:58 AM

How one U.K. e-retailer combats the recession by extending credit

Nitrotek offers six months of free credit on its remote control toys and scooters.

Lead Photo

Omar Farra

As the recession in Europe drags on, sales of luxury items remain subdued. And that includes high-end model cars, helicopters, planes and other vehicles that children and hobbyists direct via remote control.

"Everything was great in the model market up until the recession," says Omar Farra, managing director of Nitrotek Ltd, a large European e-retailer of remote-controlled toys and scooters.

Farra says sales at Nitrotek have dropped 20-30% in recent years, particularly for the site's big-ticket items, such as large model planes and helicopters, which can cost as much as 300 pounds ($570).



To combat the downturn and in response to customer enquiries about financing, Nitrotek began using U.K. credit provider Pay4Later in the spring of this year. The e-retailer now offers shoppers who qualify interest-free credit for six months on any purchase of more than 280 pounds ($455) from It offers the same deal on sales of more than 300 pounds ($486) from its web site, which sells road scooters ranging in price from 100-900 pounds ($160-$1,500).

To pay on credit, a shopper selects the instant free credit financing option at checkout and is redirected to a Pay4Later credit information form. The customer applies for financing by filling in information such as name, address, and employment and bank details. When the form is completed the customer reviews the terms of the agreement and then digitally signs the contract by clicking the e-signature box. 

Pay4Later then runs a fast  credit check and either approves or rejects the loan within five seconds.

If approved, the customer pays a 10% deposit on the item by debit or credit card and the retailer is then notified of the sale. Once Nitrotek delivers the goods, the retailer informs Pay4Later, Pay4Later pays Nitrotek and the customer's credit contract begins.

The service is only available in the U.K. and the maximum amount a customer can borrow is 5,000 pounds ($8,131). All repayments are made by direct debit from a U.K. bank and customers can choose to pay off the full amount at any time.

Pay4Later usually requires that a retailer has been in business for at least two years, has annual sales of at least 250,000 pounds ($406,574) and be profitable before it will allow it to use its service. Its other clients include online secondhand golf equipment retailer and

For Nitrotek, which uses Magento for its e-commerce platform, Pay4Later was an easy way to offer its customers financing, says Farra. 

Magento offers a Pay4later plug-in that automatically sets up the customer interface and all the back-end functionality, he says. "There was no programming involved on our side,” Farra says.  “All we had to do was decide what we wanted to offer our customers."

Pay4Later offers many financing options for retailers. Nitrotek chose to offer six months interest-free credit for its customers, absorbing Pay4Later's 9-10% interest fee. That means if the order totals 300 pounds ($488), Pay4later would transfer 270 pounds ($439) to Nitrotek minus the other small fees including a credit check fee that amount to 2.70 pounds ($4.39). Fees vary depending on the finance deal. For example, if Nitrotek wanted to offer nine months interest free finance, Pay4Later would charge 12.5% of the order amount.

Nitrotek's option costs the customer nothing, as long as they repay within the six months, Farra says.

Other costs for the retailer vary, but on top of the interest on the customer loan, Nitrotek also pays a monthly fee of 40 pounds ($64) and there is a one time sign-up fee of 195 pounds ($316).

Per transaction, there is a 20 pence fee ($0.32) for the credit check, 50 pence ($0.81) for amending or cancelling a transaction and 2.50 pounds ($4.05) commission fee for completed transactions.

Additionally, even though Nitrotek is not directly offering credit, U.K. retailers still need a consumer credit license to use the service. That cost Nitrotek 1,215 pounds ($1,969).

Farra says the fees Nitrotek has to pay are being offset by an increase in sales of 5-10%, with 50% of qualifying buyers choosing financing.

"People also tend to add more accessories, to reach the minimum spend to qualify for financing," Farra adds.

Sales for Nitrotek’s sister site, have grown even more since offering financing. Farra says sales are up around 50% since the site added the credit option, although he stresses that other factors may also have played a role in the growth, such as the new site gaining more publicity and exposure with consumers.  

Farra says businesses should develop strategies to react and adapt to the recession in Europe.

"Things are tough everywhere at the moment, but that does not mean businesses should just accept lower sales and wait until the recession ends," he says.

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