Your Business Online | Professional Jeweler

October 10, 2000
No Credit
Lack of available credit may be why some consumers aren't buying high-priced goods online

A recent New York Times e-commerce article made an important point about why consumers don't buy luxury goods online to the extent they buy lower-priced goods such as books and CDs. It's not that they need to touch and feel expensive jewelry, but that they don't have enough available credit to make the purchase.

According to the research firm IDC, consumers carry an average $8,000 in debt on their credit cards. In addition, the typical credit card user has only $500 to $1,000 of credit at any given time. It's impossible for these consumers to buy a $2,000 piece of jewelry at most online stores, but it doesn't mean they don't buy jewelry. Instead, they buy it from a store that offers some kind of payment plan.

The best way for retailers with online stores to combat this problem is to offer alternative payment plans for online customers. If you have a bricks-and-mortar store, think about what payment options you offer your in-store customers. Do you offer a 90-day same-as-cash special around the holidays or extended payment plans? If so, consider extending these options to consumers shopping at your Web store. Talk to your lenders and see if they offer solutions for online stores, and consider finding additional lenders if need be.

Your options don't end there though. The Web is full of resources and companies that would love to help. NextCard and eCredit, for example, were mentioned in the Times' article because they help merchants check a customer's credit application almost instantly. This allows merchants to offer extended payment plans during the checkout process. Customers fill out a quick application form that asks for their Social Security numbers and other relevant information. Within a minute or two, they have a credit decision.

If you are afraid to add credit application processing to your e-store or you don't have the time or money, find an alternate way to help your credit-impaired customers. You can put a notice on your site alerting customers that extended payment plans are available for in-store purchases, or offer to process applications over the phone. No matter what you decide, keep in mind e-tailers such as Ashford have already found a solution. Ashford offers an online credit application with 30-second approval and 30 days free of interest when customers use their Ashford line of credit. Remember, with holidays right around the corner, consumers are maxing-out their credit cards. Don't lose those customers; offer them other payment options.

- by Julia M. Duncan