As predicted, E-commerce has boomed (and is still booming). People buy not just through PCs but through phones and tablets as well. Buyers loved the idea! E-commerce’s market and competition is huge, now how do you keep up and advance?
The word is “empathy”-put yourself in your customers’ shoes! Your goods are wonderful, your target market is all credit classes yet your customers are just coming from the mid to upper scales. Say you sell apparel-everyone needs clothing. Come on, you don’t want to be deprived of clothing purchases just because you do not have a credit card or have a low credit limit, do you? NOT EVERYONE HAS/CAN HAVE A CREDIT CARD.
That’s where financing comes in. I know, you’ve heard about it. House, auto, cash, etc.-e-commerce financing is different. How do you benefit from it?
Not everyone can get a credit card. However, not everyone who owns credit cards pay their credit cards. How do you help the minimum waged guy who’s got a job, good payment records and a guarantor?
#1 Forget you are JUST helping the guy -Look, the guy helps you and your business in return! If you offer a financing payment method for an eBay or Amazon product (which cannot be purchased easily without credit cards), you get a big chunk of the market-those without credit cards.
# 2 Know the types of e-commerce financing -Financing is making a product affordable for your customers while earning yourself MORE SALES at HIGHER VALUES. There are two ways you can venture in e-commerce financing:
A. Plain Financing – You just find the leads, verify their payment capabilities, and finance no particular product-anything goes.
B. Retail Financing – You have particular stuff/service to sell and you offer financing as a payment method.
#3 Know your clientele -Now, there are three general categories: (1) Those who’ve got 680-850 credit scores with high credit limits (not your financing target); (2) Those with 600-680 scores, typically with $600-limited credit cards or GE capital (the perfect targets!); and, (3) Those with 300-599 scores, NO credit card (great for lay away programs*)
#4 Know your risks as a financier -Financing wouldn’t be around if it isn’t profitable. However, as in any business venture, there are risks you would have to deal with. One of which (but rarely happens) is when a customer screws you upon shipping the product-like, they get it and don’t pay you or get it and opt for a return/exchange. Worry not since you can…
#5 Secure Yourself & Your Business-Issue in #4: What if a customer screws you? That is exactly why you charge double or triple the worth of the product you finance-to fill in such gaps expenses. That is not the only way, however, to secure your financing business (whether plain or retail). As a customer shows his interest in being financed, he fills out a form for your evaluation and signs an electronic (since we’re talking e-commerce here)/ e-signing agreement that states your ‘financing terms & conditions’ such as his paying for the restocking fee, etc.
Now, there you have it: the basic steps to your e-commerce financing success. Also note that you won’t have to use money from your own pocket to start financing. You can have your financing financed by banks and “middle men” a.k.a. financing firms (whom you’d be liable to) depending on your business situation (number of years, operating costs, turnovers, etc.).
*Lay away financing program – You offer an installment method for your client where he pays you on a weekly/monthly basis and you keep the product until he has completed the payment. Upon completion, you ship him the item.