Know when to invest in your store's own credit

[jisansorkar8990]

When is the right time to invest in my own store credit ?

This is a question that is on the minds of thousands of entrepreneurs who are looking for an alternative to boost their businesses in times of crisis.

For many, this may be a somewhat controversial subject.

After all, when exactly should a chain of stores start working with its own credit ? When should it seek technology? When should it seek qualified people for this very important sales channel?

In the meetings we hold with store owners who intend to adopt our management system , these questions always end up coming up.

In this article I will try to answer them as impartially as possible.

Why do I say this?

Because I have been working with credit for over 15 years and I know very well the benefits that this operation can bring to a store. That is why I may be a little suspicious to talk about this subject.?

But I'll try to prove my point to you with some numbers and see if we can come to a common denominator.

Before we go any further, please note that I also recorded a video for our YouTube channel talking about this topic. Check it out by clicking play!
YouTube video
Are new customers really a problem?
What I hear most from the shopkeepers I talk to is the following:

“Ok, my store will start working with its own credit. But only for known customers.”

Is this really appropriate?

Let's do some math together.

Think of a store that really encourages purchases on credit.

Let's say that your own credit operation is responsible overseas chinese in australia data for around 80% of the business's revenue.

It may seem like a lot, but you can be sure that there are plenty of networks out there working with that number.

Now imagine that these 80% represent around R$100,000 per month that enters each unit of the chain.

Of this amount, only 15% percent comes from sales to new customers.

(And this is when the store really encourages this type of sale)

Now think about your credit operation.

Do you really think that stopping selling 15% of your revenue will help control defaults?

Where does default come from?
These retailers use the high default rate as an excuse not to open credit to new customers.

This is nonsense.

First, because you are giving up 15% of your revenue.

Second, because perhaps the other 85% represents a much higher default rate.

Your store can't afford to lose money trying to contain something you don't even know is the new customer it's bringing in.

Even though this customer actually poses a higher risk of default, it does not mean that he is the main person responsible for the high default rate in your store.

To understand this, you need to be careful when analyzing the numbers.

Based on the 90-day default rate, many retailers justify their position by showing, for example, that the default rate for new customers is 12%, while the rate for traditional customers is around 8%.

It turns out that these 8% represent much more than the 12%, as they refer to a larger sales volume.

Even if this retailer decides to “turn off the tap” to new customers, I guarantee that the business’s default rate will remain high.

Many people think that the traditional customer is the good customer, the customer who pays everything on time.

This is a huge mistake!

What needs to be done is to bring this rate down by investing in credit for everyone, but with a credit granting system capable of identifying the risk of each client according to their profile.