Head of a home furnishing store: payment solutions help increase basket size by up to 50%

“A third of all purchases are made using financing, meaning via instalment plans or paying in parts. In the case of durable goods, this is entirely natural, as it allows consumers to furnish their homes more quickly,” said Astrid Bachmann, head of the home furnishing store ON24. Of this 30%, one third is made up of traditional instalment credit, while two thirds consists of payments in instalments, meaning paying for goods in two or three parts.

According to Bachmann, consumers’ awareness of household budget planning has increased. “Various payment solutions help consumers keep their ongoing expenses better balanced. At the same time, they also enable reaching the desired result faster. For example, whereas previously a consumer might buy a sofa and then save money for months to purchase matching armchairs, now it is possible to design a beautiful and bright home all at once. Often without additional costs,” she explained.

The improvement in consumers’ financial literacy is also confirmed by Inbank, a company focused on consumer financing. “Consumer behaviour has become more rational and considered. Different payment solutions are used more frequently, but mainly to keep the monthly budget balanced and to leave savings for more serious unexpected expenses,” said Hanno Ladvas, Head of Inbank Estonia.

This is also supported by statistics from the Bank of Estonia: while previously one fifth of people believed that access to consumer credit increased their consumer confidence, last year this was already acknowledged by 28% of consumers.

A recent consumer survey by Inbank also revealed that nearly one third of respondents use consumer credit to purchase or repair a car (31%), slightly over a quarter for home renovation or furnishing (26%), and a quarter for electronics and home appliances (25%). “This year’s survey results clearly show that financing is increasingly used for practical expenses. There are fewer impulse purchases,” added the Head of Inbank Estonia.

Paying in instalments has grown rapidly

According to the home furnishing retailer, in the durable goods segment, such as furniture, traditional instalment credit remains popular. “There is an established customer base that uses long-term financing for larger purchases. At the same time, the newer ‘pay in three parts’ solution already makes up two thirds of the instalment portfolio,” Bachmann explained.

Ladvas confirmed that at Inbank, the fastest growth has been in the use of the “buy now, pay later” solution, which allows purchases of up to €2,500 to be split into equal parts without additional costs. “Last year, the use of this service grew by nearly 50%. This indicates that consumers also want to spread out smaller purchases if it can be done without extra fees. For consumers, this is a good way to manage their cash flow,” Ladvas said.

Without payment solutions, purchases may not happen

According to ON24, the average purchase amount is generally higher when payment solutions are used. For example, with traditional instalment credit, the shopping basket is typically twice as large, and with the “pay in three parts” solution, nearly 50% larger. “Consumers dare to think bigger in that case. People are already consciously looking for stores that offer different payment options. If these are not available, the purchase may not take place,” Bachmann noted.

The Head of Inbank added that financing solutions have become a market standard. “It is a convenience service that is part of a positive customer experience and something consumers expect. If a merchant does not offer any payment solutions beyond bank transfer payments, it is easy to lose the customer,” said Ladvas.

The head of ON24 acknowledged that merchants pay a small fee for using different payment solutions, but it is well worth it. For example, the retailer previously offered the option to pay in two parts: half upon ordering and half upon delivery. “At that time, our own funds were effectively tied up until the product was in stock and handed over to the customer. By using a partner’s payment solutions, we receive the full amount immediately, which also helps us plan cash flows better. Of course, at a certain cost, but money always has a price,” Bachmann explained, adding that from the merchant’s perspective, this is comparable to a marketing expense.