Utilizing Store Credit to Encourage Returning Customers
In business, it is inevitable that you will have customers return items. The dread of this scenario is the money lost on the item, and the potential loss of the customer. While this scenario is unpleasing, it can be used to turn one-time customers into returning customers. In turn, the small business owner doesn’t have to loose in this scenario. How is this accomplished? The small business owner can utilize store credit. First, let’s discuss what store credit is.
Ultimately, store credit is a tool to keep your money and the customer. When a customer returns an item, you offer (depending on your return policies) the option of store credit. If the customer says yes, then you give them their store credit. There are different options as to the form of a store credit. For example, some companies simply print out a store credit receipt. Another option is having an actual store credit card. This could look like a gift or credit card but used for the purpose of credit within the store. As we can see from this graph below, store credit cards have a good projection rate:
While this graph doesn’t reach up to 2017, we can see a steady incline in people using store credit cards.
How Store Credit Keeps Customers
It has been proven that customers return places they feel offer them options. Specifically by having merchandise credit as an option, customers have a credit with you. This credit encourages customers to come back and spend. Not only that, it also encourages customers to spread good word of mouth and encourages larger purchases (as reported by: https://www.patriotsoftware.com/accounting/training/blog/offer-credit-customers-pros-cons/). Due to this, you, the small business owner, will keep money growing in your company.
Two Ways Store Credit Works
Store credit works in two ways. One is the aforementioned way of offering a store credit for a return in place of money back. The other way store credit works is by offering a store credit card. Similar to a gift card, a store credit card offers your customers another payment option. Simply put, when a customer signs up for a store credit card they are purchasing items from your store and paying installments on those items. Exactly the same way a credit card works, except you and the card company you choose are the only two that benefit. This second method of store credit takes careful consideration as there are benefits and repercussions.
From the sba.gov article “Extending Credit to Your Customers”, learning about consumer credit laws is the first step in considering this option. If a customer will not be able to pay their payment plan, you will likely have to bear the financial burden. However, for qualifying customers, they will likely spend more and shop more with you. Screening qualifying customer is a must for this option. As well as deciding if it will reap you more benefits versus more financial burden.
Small Business and Customer
Small business is a competitive world. In addition, more and more people are turning to internet shopping. This makes it all the more important to utilize all tools available to your business. Store credit is a proven, viable option to turn one time customers into repeat customers.
Contact Weylan Corporation today to learn more about how we can help you, the small business owner, succeed.
by
Iris Aaron
Weylan Corporation
Media Division
1-877-672-3822
[email protected]