Is Retail Financing Going Through a Change?

As a consultant, I subscribe to the Harvard Business Review. The HBR is powerful academic tool devoted to exploring business theory. Often, things that become common business practice five years from now appear in the pages of the HBR today. It is, in my opinion, lacking in practical experience, but rich in theory and early analysis of trends.

The latest issue (September 2009) ran a short article on pages 15 and 16 titled “Selling to the Debt-Averse Consumer.” Here is how the article started:

The successful consumer-oriented companies in the coming years will be those that can figure out how to make do without the former life of the economic party: the monthly payer. In his heyday, this kind of consumer asked himself not whether he could come up with the whole cost of a vacation or landscaping or a car but whether he could afford the resulting increase in his monthly bills.

The article goes on to suggest that to succeed in our new economic reality, sellers will need to promote value and utility over luxury and brand.  They say, “Consumers won’t be able to buy as many goods as before” but will be favorably disposed towards a vendor who helps them see their decision as a lifestyle choice rather than an option forced on them by the sour economy. They suggest sellers focus on messages around family, life simplification and getting back to the basics.

In his crystal ball, author Eric Janszen says, “Will the monthly payment consumer ever come back? The Federal Reserve wants to reinflate the credit bubble and engineer a return to the old days. But that isn’t possible”  because the cash flows just won’t be there.

I pondered this recently on a plane flight to Georgia and wondered if this was being felt in the HVAC business yet.  So when I got to my client in Georgia, I asked his assembled TMs if their dealers were finding it harder to sell people on retail financing. They replied that it was, due (they felt ) to a higher turn-down rate from the financing companies (a good point). When I asked them what they thought of the HBR’s premise, they said that it sounded reasonable— and that it scared the bejeebers out of them!

So I wonder, and ask you— as contractors or territory managers (or as consumers), are you finding fewer and people going with financing on their jobs? And if they are, how does that change our sales approach?

Let me know your thoughts. I’ll post any and all replies that are well-thought and printable!