Libby Minogue is the Chief Revenue Officer at flexigroup, the pioneer of buy-now-pay-later in Australia, and the engine behind humm. Humm offers consumers access to responsible buy-now-pay-later for purchases with partner retailers from $1-$30,000. The platform is split into two bands titled ‘Little Things’ (up to $2,000) and ‘Big Things’ (up to $30,000). Humm is offered in over 15,000 retailers across Australia, including Myer, IKEA, and Just Group.
According to a new report, customers are prone to delaying purchases that sit outside their regular budget - even when they’re absolutely necessary. This could have huge implications for the repairs industry, whose entire trade is in unexpected but vital work.
Like it or not, no one enjoys spending money on vehicle repairs. Just like going to the dentist or paying for a medical procedure, emergency repairs are simply a necessary fact of life that we’d all prefer to avoid where possible. However, according to new research, customers are putting off necessary purchases in a bid to stick to their budgets, and it might have big implications for the paint and panel repair industry.
According to Flexigroup’s 2019 Spending and Saving Report, over half of consumers choose to delay certain important purchases because they couldn’t afford them. The report found 51% of respondents delayed necessary dental work because they couldn’t afford it, while 29% delayed undergoing a medical procedure. And if this is how we react when we’re asked to spend money on our own health, do you really think we’ll treat our vehicles with any more care?
In cases of minor damage, such as a keyed car or corrosive bird droppings, many car owners will forego the insurance route and put off remedial attention until the problem gets too big to ignore – but this also causes repairs to become more expensive. Swift intervention can prevent many of these issues, but owners may find it hard to justify spending a few hundred dollars at the time.
The report also found how Australian consumers love a bargain, with more than 90% of consumers seeking out a discount or special offer prior to making a purchase, and two in three consumers admitting to searching for discounts all the time. In fact, more than half admit that seeking out discounts is almost like a full-time job.
Combine these two factors: a tendency to delay important purchases and an obsession with bargain-hunting, and it looks like many repair shops have a challenge on their hands. So how can the repair industry start to persuade customers to part with their money?
Pushing beyond the budget barrier
The industry has several options when it comes to attracting sales from even the most budget-conscious of consumers. Accepting a wider range of purchasing options, including buy now, pay later (BNPL) options is one solution. A wider selection of options can often make a sale easier for customers and remove the added pressure of worrying about whether the repair work is in their budget.
Since layby is not typically a feasible option for service businesses, BNPL is one of the only financial mechanisms that let clients pay in instalments without the spectre of high interest rates looming over the amount owed. This is great news for any paint and panel shop looking to offer a wider range of payment options, while maintaining their integrity as a responsible business.
The report reveals that about seven in eight people have a good understanding of BNPL, and almost 60% indicated they would use it to make a surprise or unexpected purchase (‘such as a new dishwasher to replace a broken one or a health bill’). This suggests there’s a good case for service providers like auto shops that deal with ‘accidental’ expenses to offer a BNPL option.
Do your research
As with any financial partnership, you should research your options before deciding on a provider. BNPL providers should have a clear customer eligibility and onboarding process to maintain security on both the customer and shop side. All well-respected BNPL offerings should do their due diligence on consumers, which includes age limits, identification, residency and employment checks, and solvency checks, so make sure you understand how your chosen service works before signing on.
To be clear, a reputable BNPL provider is not in the business of offering predatory credit to people in extreme financial hardship who are unlikely to be able to pay instalments on time. Beware of BNPL providers that make a significant portion of their revenue on late fees and opt for those with low or no interest.
Since auto repairs can range from a few hundred dollars to a few thousand, it also helps to have a BNPL provider with a versatile price offering. Many BNPL providers in the retail space sit in the lower range because it’s easier to administer, but you might consider opting for one that will cover higher figures due to the nature of the repairs you’re conducting.
Finally, businesses should also check how long the provider takes to pay. If you’re waiting until the end of the month, then the BNPL mechanism may not be as beneficial for your cash flow as dealing with credit cards or invoices. Fortunately, some pay more frequently – for example, weekly or the very next day – so ask when you’re looking to sign on.
Offering BNPL can be a customer’s deciding factor in choosing your shop over another repairer. As revealed in the report, clients are remarkably savvy about the ‘cost’ of money. Having a BNPL partner allows you to promote a sensible way for customers to pay for any unexpected repairs. Many people delay minor repairs because they don’t see the savings from preventative action, but BNPL can help them see smaller repayments as an investment to guard against larger costs.
In an industry where most people come in for reactive repairs rather than on their own initiative, flexible payment options are a must.
It is easy for repairs and preventative maintenance to be put off if a consumer can’t see the damage themselves, or they don’t understand the importance. So communicate this well and honestly, including to explain the implications of delaying work on their vehicle and making it relatable. For example, you can use illustrations, use visual aids, and make comparisons with other important maintenance that they need in life (such as their health or a leaking roof). This is part of helping them make an informed decision, rather than a decision only based on dollar signs.
Repairers must remove as many barriers as possible, including the ever-present fear of breaking their budget.