MATTRESS STORES = FUNERAL HOMES
by Bryan Stevens
H
ave you ever noticed how many mattress stores are
in your city? In my city of 70,000 residents there are
16 mattress stores and that does not include the big box
retailers. How often do people buy mattresses that allows
for 16 stores in a small population?
The growth of the mattress stores has been mainly tied to
consumer financing not the need to replace your mattress.
If consumers have access to financing a purchase rather
than use savings or credit cards, then you are more likely
to replace their mattress when something better comes
along or a new mattress may cure an ache or pain.
Data supports that most consumers today have little or no
savings to purchase products over $1,000 or to handle an
unexpected expense like an expensive car repair, broken furnace
or water heater or the unexpected funeral of a loved one.
credit cards. Consumer financing in the funeral space is not
a new concept in the funeral business but it has not been
effective or impactful either. Rather than using a credit card
or asking other family members to help with the funeral
expenses, consumers are moving to lower cost alternatives
rather than a full service funeral. This consumer alternative
puts pressure on margins and earnings that we believe will
continue into the foreseeable future.
How do you counteract this consumer choice? Let’s go
back to the beginning of this article:
Question: How do 16 mattress stores survive in a city of
70,000 people when the average mattress purchase is
every 8 years?
Answer: Consumer financing
Approximately 62% of Americans have less than $1,000 in
their savings accounts and 21% don’t even have a savings
account, according to a new survey of more than 5,000
adults conducted this month by Google Consumer Survey
for personal finance website GOBankingRates.com.
Though it may seem uncomfortable or unethical to talk
about going into debt over a funeral – the consumer may
feel more relieved knowing there are alternatives to paying
for the funeral rather than have a difficult conversation with
you on their inability to pay or what can they remove from
the funeral to cut their costs.
A survey of 1,000 adults carried out earlier this year by
personal finance site Bankrate.com, which also found that
62% of Americans have no emergency savings for things
such as a $1,000 emergency room visit or a $500 car repair.
Faced with an emergency, they say they would raise the
money by reducing spending elsewhere (26%), borrowing
from family and/or friends (16%) or using credit cards (12%).
The most difficult challenge for the funeral owner is to
recognize that spending 10 minutes longer with a client to
explore financing options may increase the sale amount
or save the sale entirely. What most funeral home owners
don’t know is the consumer finance industry has made
leaps in bounds in their loan approval and closing process.
America's outstanding credit card debt is projected to total
$900 billion by the end of the year, bringing the average
indebted household's balance to $7,813—the highest amount
since 2008, when the average was $8,428. Published by
CNBC – September 2015.
The national average FICO score is now 695—the highest it's
been for at least a decade, according to the latest analysis
from Fair Isaac Corp., which created the score. A separate
analysis by Experian put the average VantageScore, which
was developed by Experian and the other national credit
reporting companies Equifax and TransUnion, at 667, which is
still considered good. Published by CNBC – September 2015
The data is depressing if not scary. More and more consumers
need alternatives to tapping their savings or using standard
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What has occurred in the consumer finance space over the
past three years, is on-line loan approvals, digital signatures,
no paperwork and no waiting. Loan approvals that took
days has turned into minutes or even seconds. Running to
the bank to deliver documents has been replaced with online digital signatures and email. Having to wait for a check
to be cut by the bank and running to the bank to pick up a
check and deposit into your account has been replaced with
automatic ACH of funds into your account within 48 hours.
I recently wrote an article for another publication on why
banks have lost interest in consumer financing for the funeral
business. That statement still remains true and most, if not all,
local banks neither have the interest nor desire to finance a
funeral for a consumer. The alternative to banks is consumer
finance companies that do have the interest to finance these
www.funeralbusinessadvisor.com
types of purchases. Consumer finance companies have
creative products that banks cannot provide. For example,
when was the last time your bank offered 6 months same as
cash on a loan? Never. Consumer finance companies make
6 months same as cash as a staple for financing.
As a funeral home owner, you should not feel uncomfortable
to talk about funeral financing and should encourage clients
to look at these financing alternatives rather than use credit
cards. Here are some reasons to offer consumer financing:
1. Not decrease the sale amount based on the consumer’s
credit card availability.
2. Provide sufficient time for the client to sell assets by
using a same-as-cash option.
3. Provide time for the client to engage other family members to help defray costs with paying off the loan.
4. Not wanting to wait for insurance proceeds to be sent to
you but providing an alternative so you get your funds quickly
and allow the client to wait on the insurance proceeds.
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5. Reduce the interest costs by using same as cash financing. Remember credit card interest rates begin immediately
and are never deferred.
6. Reducing your risk of carrying the debt because the
client lacks the funds to pay for the funeral. You get paid
within 48 hours with no recourse to you for consumer
non-payment.
We think consumer financing is not only a critical option
but a necessary tool for every funeral home to maintain
profit margins, grow revenues and improve cash flow.
You’re not selling mattresses but the underlying reasons
for offering consumer financing remains the same –
consumers need it and want it.
(This article was written by Bryan Stevens of Red Apple Capital in
collaboration with industry veteran Tony Colson, former
President and CEO of Wilbert Funeral Services and current
owner of E. Harper & Son Funeral Home)
www.funeralbusinessadvisor.com