The Hindu Business Line : Retailers bet on easy finance schemes for niche home needs

Retail chains offer consumers zero per cent equated monthly instalment finance schemes through strategic tie-ups with several national and multinational banks.

Debdatta Das

New Delhi, Aug. 29 Consumer finance has taken on a new hue. After being used for years primarily to finance the mega needs of consumers for lifestyle essentials such as refrigerators, washing machines, televisions and computers, it now also includes the niche needs of consumers for purchase of furniture, furnishings and mobiles.

Home solution formats of modern retail chains, in fact, feel that their offtake of goods from easy zero per cent finance schemes is set to increase from the current 5 per cent to over 20 per cent by the end of the fiscal. Mobile retailers are also seeing an increase in purchases through consumer loans.

Retail chains such as the Future Group-owned Home Town, Reliance Retail’s Digital outlets and Subhiksha’s mobile stores all offer consumers zero per cent equated monthly instalment (EMI) finance schemes through strategic tie-ups with several national and multinational banks. In fact, the Future Group even uses its financial arm, Future Money, for the purpose.

Mr Mahesh Shah, CEO, Home Town, the home solution format of the Future Group, said, “With real estate costs booming, people buy houses that they are unable to furnish at one go. Through Home Town we are able to service the desires of people who have the aspiration and need, but can’t afford it.” Finance schemes at Home Town are for a year or two years, on a minimum purchase of Rs 10,000. “Of our overall sales 5 per cent is from easy financing schemes, and with the growing popularity we expect easy financing to contribute over 20 per cent to sales in the next six months,” said Mr Shah. The company currently has two Home Town outlets and plans eight more by the end of December.

Mr R. Subramanian, Managing Director of discount chain Subhiksha, which uses an easy finance scheme for mobiles, said, “There is a fast emerging market for buying on credit. When compared to a decade ago, interest rates have declined on loans as well as credit cards. There is also a greater awareness on the usage of credit cards.”

He added, “Consumers generally go in for financing for mobiles that cost over Rs 5,000. Almost 50-60 per cent of the total mobile sales either through the shop-in-shop or stand alone formats, are through credit cards, 50 per cent of which are through finance schemes, where the customer pays his instalments through the credit card.” In fact, the Chennai-headquartered retail chain also offers direct finance schemes to people who don’t possess credit cards, through a tie-up with Citibank. The company currently has 400 points of sales through which mobiles are sold, garnering around Rs 35 crore in revenues.

“Contrary to belief, an equal number of high income group people prefer to buy through finance schemes. Through easy finance, retail chains have finally started tapping into the real needs of the consumers. With the retail scenario booming, such offerings will only get better and innovative financing schemes will start coming forth,” said an industry expert.

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