Backed by a sharp increase in consumer confidence, the retail industry continues to see a rise in sales and retail credit cards. In Q3 2016, retail cards reached 125.3 million among United States consumers, TransUnion research reported. As retailers benefit from the revenue produced by extending credit to customers, increasing vulnerability to retail credit card debt may require the service of a successful debt collection agency.
While it is no secret that discounts, promotions and other cardholder specials compel customers to sign up at the register, for some, the incentive goes beyond promotional perks. Consumers with low credit ratings that may not qualify for bank credit cards continue to find retail credit cards readily available, leaving businesses at risk.
Consumer Metrics
In 2016, consumers on average owned 1.51 retail credit cards, with a balance of $1,081, according to Experian’s seventh annual credit report. Experian found that Baby Boomers own the highest number of retail cards per consumer at 1.82, while the Silent Generation own the least with an average of 1.12 per consumer. Generation X currently holds the largest retail credit card debt at $1,347 per consumer, while Generation Z holds the smallest at $402 per consumer.
Store-brand credit card growth surges during the winter holiday months as customers seek out the best bargains for personal and holiday shopping, TransUnion research concludes, citing that account openings often double in December.
Retailers who extend store-brand credit card offers build trust, brand loyalty and rapport with customers. Retail cards help to establish repeat customers, increasing individual customer purchases with the option for credit payments. While retail credit cards benefit businesses in a variety of ways, consumers holding outstanding retail credit card debt leave accounts receivable management a necessity for all retailers.
Managing Customer Retail Credit Card Debt
Businesses currently operating in-house accounts receivable management may be moderately effective; however, this method is not efficient. Large or small, retailers enlisting employees to track down customers to collect overdue payments drive time, resources and profits away from the business and towards the debtor. Employing a debt collection agency remains the optimal solution to optimize a business’s profitability.
At Optio Solutions, our successful debt collection strategies serve the retail industry with leading technology and data security, safeguards in brand protection and a deep commitment to compliance.
From specialty retail stores to nationwide department store chains, Optio’s services are scalable to fit unique business needs. Our individualized programs offer first- and third-party collections, providing multiple strategies to preserve revenue and customer relations. First party collections appear to be coming directly from clients while the third-party method entails collectors identifying themselves as representatives of an agency.
Optio first-party collections extend two effective strategies to retailers: strategy one letter writing and strategy two phone calling. Our strategy one letter series drives communication back to businesses, allowing retailers to maintain a positive image and customer experience.
Strategy one will prompt customers to take one of three actions: pay overdue bills, contact retailers to make payment arrangements, or disregard all Optio letters and thus identifying themselves as individuals in need of strategy two.
Implementing strategy two phone calling will have a higher success rate with customers that have cycled through strategy one.
The Optio Solution
While extending credit to customers presents the possibility of unpaid charges, Optio’s successful solutions mitigate those risks. Our agency assists retailers in conducting quick and efficient collections while allowing businesses to focus resources on generating profits and connecting with consumers.
Contact us today to create a retail credit card debt collection strategy specialized to your company needs.
