How IBDs can take their payment options up a gear

As more people look to bikes for their daily commutes, IBDs need to nudge them along. The question is – how?
By Michael Bevan, CEO at consumer finance specialist, Duologi

Public appetite for cycle travel is growing. A perfect storm of environmental consciousness and desire for health and wellness is driving a boom in leisure and commuter cycling alike. Yet, for bicycle retailers, there is still plenty of work to be done in encouraging more cyclists to make what is often a substantial financial investment.

According to Cycling UK, bicycle use has increased almost every year since 2008. The number of miles cycled in 2017 sitting at around 3.27 billion, which is around 29% higher than the figure for 1997. Figures from the Department of Transport suggest that in 2016/2017, 3.4% of the population in England aged 16 and above cycled five times a week, equating to around 1.5 million people. These figures went up to 5.7%, or 2.6 million people, cycling at least three times a week, and 11.9%, or 5.3 million people, cycling at least once a week.

Nevertheless, as Cycling UK also points out, “there is a long way to go until cycling reaches the levels seen in 1949 (14.7 billion vehicle miles)”. And no one could claim that even 10% of the adult population being regular cyclists is a landslide yet. Whilst more and more people look set to swap engines for pedals on the daily commute over the coming years – benefiting their health, their pockets and the environment in the process – retailers are going to need to nudge them along.

The question is – how?

Join the campaign
Public awareness and campaigning will be two major pieces to the puzzle. Retailers are in a powerful position to join forces with organisations like Cycling UK and campaign more for interventions like cycle superhighways, which make cycle travel safer and more appealing.

Partnerships with local schools and employers are another option, enabling retailers to reach a ready-made audience of potential customers in return for, say, providing training on cycle safety or bike maintenance. The more knowledge people are empowered with in relation to both cycling and bicycles, the more likely those people are to shift onto two wheels.

A significant outlay
However, retailers also need to pay attention to the financial outlay involved in purchasing a new bike, particularly in light of the turbulent economic and political environment, which tends to put people off making significant or perceived luxury expenses.

There is no denying that high-quality bikes can be expensive. A cursory Google search reveals a wealth of articles suggesting that ‘decent road bikes start from around £250’. Not a fortune, but not an insignificant amount of money either. Meanwhile, e-bikes can cost up to £2,800, depending on specification, whilst even the more ‘budget-friendly’ hybrid models are priced in the hundreds.

In practice, this means that retailers operating under traditional upfront payment methods risk alienating a huge base of potential cyclists. Innovate here, and retailers could potentially encourage thousands or even millions more people to take the plunge.

Of course, innovative payment models are not new to the cycling sector. The Cycle to Work scheme was introduced in 1999, enabling employees to spend on bicycles and associated equipment tax-free, and in manageable stages. Statistics suggest that the average spend through such a scheme is around £800, a stark reminder that, when properly supported, cycling is something on which people are prepared to spend substantial sums.

But cycling retailers can go even further. Cycle to Work is popular because it saves customers money – but also because it enables them to spread the cost of a large purchase in a manageable way. Retailers can implement a very similar model with the help of point of sale (POS) finance – that is, an interest-free loan at the point of purchase.

Understanding POS finance
So what does POS finance look like? The short answer is that there is no short answer – because POS finance can be tailored in myriad ways according to the retailer, purchased item and customer in question. The amount of the loan, what proportion of the purchase price the loan covers and its payment terms can all be tailored according to the needs and profile or that particular purchase. Indeed, this flexibility – even more agile and bespoke than a mass corporate scheme – is one reason why bicycle retailers should be keen to explore the options.

And this flexibility is appealing to customers. At Duologi, we recently investigated UK consumer’s attitudes to POS finance and found that over a third – 34% in total – of shoppers said that they would be more likely to buy from a retailer offering POS credit in the form of an interest-free loan. Given that, as we have seen, only around 10% of the UK population may be cycling on a weekly basis, this suggests clear space for retailer growth.

Yet, despite this, nearly all of the consumers we surveyed – 94% in total – said that they wouldn’t think to ask a retailer if POS finance was available. It hasn’t yet been normalised across different sectors; in many people’s minds, “spreading the cost” is associated with specific products, such as white goods or sofas.

The message for bicycle retailers, then, is clear. There is a substantial opportunity here to offer interested but uncertain shoppers far more flexible and affordable means of buying what may be one of their heftiest purchases all year – but one which for a variety of health, environmental and ongoing financial reasons, they are very keen to be able to make.

Designing a POS solution to fit
From there, bicycle retailers need to think carefully about how to set up and market a POS solution, ensuring that it reflects and enhances their overall brand, and ultimately makes life easier for customers.

As we have seen, visibility is essential for customers who are unlikely to think to ask, but this visibility must be thoughtfully in line with brand positioning. Brash messaging around interest-free loans and ‘nothing to pay today’ are unlikely to sit well with retailers which want to be seen as trusted advisors, businesses that help customers find the right bike for their needs, and are happy to provide advice and maintenance long after the original purchase. Instead, messaging and positioning should focus on flexibility, affordability and information.

Remember that, for customers, the critical information is the size of the regular payment, the date of the regular payment, and the length of the payment term – as well as the amount that they will have paid overall. This information needs to be absolutely clear from the outset, particularly the point that this does not make the bicycle more expensive overall. In other words, retailers need to be able to undertake these calculations quickly and seamlessly at the checkout, so that the customer can make a fast and informed decision.

For customers who want to go ahead with POS finance, it is then vital that the application process is just as smooth and seamless. Whether it is taking place online or instore, the application form needs to be simple, it needs to be straightforward, it needs to result in a quick decision and it needs to have low referral rates – the rate at which a decision cannot be made immediately and needs to be escalated to a non-automated process.

Like cycling itself, POS finance has the potential to grow enormously in the UK. Forward-thinking retailers can take their payment options up a gear now.