Why You Need Online Financing in Your Ecommerce Store
Extra costs like shipping, taxes, and other fees are a major concern for online consumers. In fact, research from Baymard Institute reports that they are the number one reason for cart abandonment during checkout.
To help keep the cost down, more and more ecommerce shops are offering online financing. A flexible payment option allows shoppers to pay for an item or an entire order in increments, as opposed to stomaching the entire cost upfront.
Online financing offers numerous benefits for etailers as well. Here are several compelling reasons why ecommerce stores should offer it.
Online Financing Improves AOV
Giving your customers the option of online financing means that they’re not only more likely to buy, but to buy more. Because they’re shopping with the knowledge that they can break up a large total into more manageable payments, they feel empowered to add items to their carts while they’re browsing.
Greater customer purchasing power opens up retail opportunities. For example, once you empower customers through financing, you can increase upsell and cross-sell offers at checkout. Displaying related products on the checkout page or offering discounts for bundled orders will increase AOV over the long term.
Stand-up paddleboard retailer and Bread customer YOLO Board has increased their average order value (AOV) by 17% since implementing financing for their shoppers. Additionally, the AOV of YOLO Board’s financed sales is 76% higher than the AOV of non-financed sales.
Online Financing Reduces Cart Abandonment
It has already been established that costs are a major reason why shoppers neglect to complete purchases. The average rate of online cart abandonment is 69.89%, which can mean a huge hit for an ecommerce store’s bottom line.
Why do customers abandon their shopping carts? Data from Internet Retailer shows that 46.1% of cart abandonment occurs at the payment stage, and 37.4% occurs at checkout login. This implies that there’s friction around the payment stage of the customer journey. Shoppers remain engaged while browsing product pages but start to have doubts at checkout.
You can reduce checkout friction in several ways: Chatbots can answer doubts about extra postage costs, visible customer testimonials or reviews can build trust and reduce anxiety, and online financing options can reduce the biggest friction point of all—inability or reluctance to cover total costs.
When you offer financing at checkout, customers can complete their purchase without having to fund the total of their order immediately. The option to buy now and pay later means they’re less likely to become intimidated by the cost and walk away without purchasing.
Read Bread’s 4 top tips for reducing cart abandonment
Online Financing Improves the Impact of Abandonment Email Campaigns
Implementing a cart-abandonment email campaign is an effective strategy for winning back those customers who leave during the checkout process: 46.1% of people open cart-abandonment emails, and 13.3% actually click inside them.
But if the total cost remains too high, shoppers are likely to abandon the cart again—unless etailers call attention to their financing options. Within your cart-abandonment emails, highlight financing options so customers are educated and reminded about the flexible payment options that are available to them.
You can also emphasize the amount they’d owe today to complete their order (as opposed to the total cost), encouraging confidence and increasing their purchasing power. Combine that with abandonment-email best practices, like timing and killer subject lines, for impactful abandonment campaigns.
Bread customer Original ScrapBox knew that offering the right financing would help them close more sales during the peak holiday shopping season. They decided to offer 0% APR financing and sent targeted email blasts to cart abandoners, non-purchasers (people who never put anything in the cart), and dormant subscribers to call attention to the attractive rate.
As a result, Original ScrapBox ended up making more financed sales in November and December than they had over the past 12 months with their previous financing partner—proof that calling attention to financing options really does make a difference.
Online Financing Gives Your Customers a Convenient Way to Pay
Particularly with substantial orders or big-ticket items, customers may be hesitant to put such a large sum on their credit card or make a major purchase if they haven’t yet established credit.
Online financing gives your customers a convenient, hassle-free way to cover their purchases while simultaneously navigating those common concerns.
While financing increases convenience for your shoppers, there’s no “gotcha” moment for you as the retailer. Minus a small fee, you’ll receive the total payment for any orders up front, despite the fact that customers are making monthly payments. Additionally, the financing company shoulders all of the risk associated with the financing.
There’s no untrustworthy scheme here. Online financing is a mutually beneficial relationship for both you and your financing partner—you’re really on the same team. When you increase your AOV and conversions, you both win.
Online Financing Could Increase Customer Loyalty
Thirty percent of consumers say they would rather buy from a website they’ve bought from previously than from an unfamiliar store. That’s understandable: Buying online can be nerve-racking, and shoppers prefer to spend with brands and suppliers they trust.
Online financing offers a great opportunity to start building long-term customer relationships. Interest-free payments offer a smarter alternative to traditional credit cards or store cards. And white-label financing options, like those Bread offers, create a delightful shopping experience. Shoppers simply fill out a short form on your website to get approved for instant credit. They’ll get the purchasing power they need — without ever leaving your site.
If online financing successfully persuades consumers to buy from your store, make sure to multiply the loyalty effect with things like loyalty programs and special offers. For example, special restricted-access sales or free delivery for returning customers will keep customers coming back time and again, increasing customer lifetime value and the bottom line.
Online Financing Gives Your Ecommerce Store a Boost
You may not be able to lower shipping fees or taxes, but when total cost prevents customers from completing purchases, you can offer online financing. It’s good for you and your customers.
Shoppers get increased purchasing power, greater flexibility, and greater convenience during checkout, and retailers benefit from higher AOV, reduced cart abandonment, more effective abandonment-email campaigns, and improved customer engagement.
Plus, online financing comes with little to no risk for you as the retailer. Implementing it in your own store is a no-brainer.
Ready to get started? Request a demo of Bread to close more sales and unlock the full potential of your ecommerce store.