How the “installment shoes” service can increase profits
How the “installment shoes” service can increase profits
In 2009, the Obuv Rossii company introduced in its stores Westfalika and Pedestrian the installment purchase service and the microfinance service for the population. During the autumn Retail Business Russia forum, Oleg Titov, general director of the company, revealed the mechanism of the service and the results of its implementation in the sales process.
Reference: Obuv Rossii Group of Companies manages the Westfalika, Pedestrian and Emilia Estra shoe chains. Included in the top 5 of the largest shoe companies in Russia, has more than 250 stores in 80 cities of Russia. In 2012, the company's revenue amounted to 3,3 billion rubles, revenue plan for 2013 year - 5 billion rubles.
Obuv Rossii organized the service of selling goods by installments independently, without the participation of banks or other financial organizations. It allows customers over 23 years to pay in equal installments and even without a down payment for shoes over a period of 3 to 5 months, and if desired, repay the purchase ahead of schedule without additional fees. At the same time, in order to use the service, the buyer only needs a passport, and payment can be repaid not only through the store’s cash desk or through the bank, but also through the PinPay terminal.
A few years after the installment program was launched, a microfinance service for the population appeared on its basis. This service is also provided by Obuv Rossii without the help of banks, although the company has a long relationship with them, because in 2007 it became the first shoe company to credit shoe purchases. Own microloans “Obuv Rossii” disburses up to 20 000 rubles and for a period of up to one year. The peculiarity of the service lies in the fact that it demonstrates a low level of non-return - not higher than 7%. This is due to the fact that loans are granted only to customers who have already purchased shoes by installments and have successfully fulfilled their obligations to the company. There are more than 300 thousand of such customers in the Shoe of Russia database, and more than half of them have resorted to installment purchases more than once. In general, 20% of buyers who used the "installment plan" service received approval and received a microloan. Basically, they took loans to pay for current needs and paid debt for one month.
The portrait of the average user of these additional services coincides with the portrait of a typical buyer of the Obuv Rossii networks: these are mainly women (85%) aged 30 to 34 years old, with a family of 2-3 people and an income of 10-15 thousand rubles per month per family member. Of course, there are exceptions to this portrait: for example, shortly after launching the company's services, it was necessary to raise the age limit to 70 years, since pensioners were interested in installments and microloans.
A total of about 100 managers with experience in banks are involved in the management of the “Installment Shoes” and “Microfinance” projects. These specialists work in the IT, commercial and financial services departments with three divisions - retail lending, analytical support and financial security. To service the services, a special IT system was created, which is integrated with the 1С system, which allows you to evaluate the creditworthiness of the candidate online, arrange and maintain installment and microloan agreements, and interact with customers who do not repay the debt for a long time.
To inform customers about the terms of services, the company created the website www.rassro4ka.ru and the corresponding sections on the network sites; special places were equipped in order to draw up installment and loan agreements in stores, and a call center was created to answer common questions.
In the future, the development of services will include organizing various installments of installment services, improving microloan options depending on credit history and accepting payments via the PinPay system in chain stores not only in Novosibirsk, Kuzbass and Magnitogorsk, but also in other cities.
Buyers quickly appreciated the opportunity to buy shoes with deferred payment, and if in 2010, the share of installment sales in the company's turnover was 20%, then in 2012 this figure grew to 45%, amounting to about 1,5 billion rubles. The Obuv Rossii GC plans by the end of the 2013 of the year to bring installment sales to the level above 2 billion rubles so that they amount to 50% of the company's revenue. As for the microfinance service, in the first half of the 2013 year, more than 45 thousand contracts were signed for a total of 633 million rubles. By the end of the year, Obuv Rossii plans to issue loans worth 1,5 billion rubles, in which the interest income of the company will amount to 500 million rubles, that is, 10% of revenue. In addition to a steady increase in sales of up to 50% and revenue growth of 10%, new services have other benefits. For example, new customers began to come to chain stores, the average check increased, and all this against the background of a stable number of cash purchases.
The introduction of the services “Installment Shoes” and “Microfinancing” not only increases customer loyalty and strengthens the competitive advantage, but also takes the company to a new level of development at which the shoe store is not only a point of sale, but also a universal service company. Enterprises in more developed retail markets have taken such a path, and the food and cell retailers of Russia are choosing the same development strategy. In fact, Obuv Rossii was the first shoe company to embark on a development path as a retailer with one-stop service. The picture in numbers: For 2010 - 2013, the share of installment sales increased from 20 to 50%
To date, more than 300 thousand people have used the “installment shoes” service. Installment sales in 2012 amounted to 1,5 billion rubles, the plan for 2013 year is more than 2 billion rubles. The amount of microloans issued in 2012 year amounted to 580 million rubles. In the first half of 2013 year more than 45 thousand contracts were signed in the amount of 633 million rubles. The plan for issuing loans for the 2013 year is 1,5 billion rubles.
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