Customers always come first, it’s easy to understand what are the benefits for buying in installments when purchasing a new product. However, many may ask what benefits does it bring to stores and business-owners that offer installment services? Buyers or consumers benefit from buying products they desire without having to pay for it all at once. Which enables consumers to buy whatever they want irregardless of price, especially if customers don't have the full price available right away. So, what could be the benefit for stores and sellers offering installment services? A common question that you will probably ask yourself when you put yourself in the buyer’s place is why give customers the option to buy in installments instead of receiving the full price all at once especially if it’s a product that reaches high sales right away such as mobile phones, gaming consoles, house appliances and so on.
Buyers might also ask themselves a question like what is the benefit I am getting from offering products in installments even though payers pay in full price to purchase products from the manufacturer or importer, or even the original manufacturer of the product. We will answer today’s questions from the business-owners’ perspective to understand why stores offer installment services. And to understand how business-owners benefit from installments instead of getting full price at once.
Why do business-owners offer installment payments?
Installment services isn’t a new trend and is not an idea that just made it to the scene in the past couple of years. It’s something we used to hear every day in old movies from the 40s and 50s, in which installments were mentioned in most of them. Nonetheless, it has shown that installment payments existed even before black and white movies. It began a long time ago, ever since the concept of “Buy now, pay later” appeared. Which is an old concept that spread around the 19 century till it took the shape of what we know today in the 20th and 21st centuries.
The installment service appeared in its form today and established the principles during the Great Depression—a period that caused a complete immobility in the market especially the US market. And those principles are just being used till today. During this period the buying and selling movement completely froze, that’s why they needed to come up with a solution that could still move the sales and the market. Installment payments were a solution to get rid of the accumulated products on the shelves and to get the economy going. From then stores started implementing installment payment options. After applying this method the buyer and selling process began to take off, thus the economy was moving again. And it was not just serving the buyer, but also it was serving the seller and the economy in general. News and information about the Great Depression historical incident can be found on many sources and on the internet. From which we can understand that the same benefits were returned to the sellers as well as the customers and to the economy during. And it’s the same benefit for modern stores nowadays. In order to elaborate on the issue more, we will identify these benefits precisely in specific and clear points.
-The first feature of the installment advantages is that it helps push and move the market forward. As through the installment service, the shop or store is able to sell a greater number of products for customers who can’t afford to pay in full price. Thus, it makes shops sell more products in less time and it makes the entire market move more positively.
-Secondly, the installment service helps stores expand its potential customers. For example, if the store is selling a product that costs 20 thousand EGP in cash, only a small group of customers will be able to afford to pay in full price. However, if the shop offered installment payment amounting to a thousand or 2 thousand EGP, more people will afford it. Which makes the customer base larger, thus achieving more overall profit.
-When providing installment payments, the total amount of the product is usually greater than the amount if paid in cash with full price. If we assume the same product amounting to 20 thousand EGP, its price with the installment payment will amount to 25 or 30 EGP in installments. Meaning that the total amount of the product in installments is greater than the actual price in cash.
-Other advantages include strengthening the relationship between the seller and the customer. Not to mention that the installment service customer is always a potential customer in the future. If customers are familiar with the installment service from one shop or store, and the customer is satisfied with the services, it’s most likely the customer will use the same service in the future. Which is considered a great advantage for the seller.
-Just like customers have monthly obligations to make sure they are on the track of providing their payments, business-owners also have monthly obligations they work towards paying off. Via installment payments business-owners are able to comply with those obligations due to the amount they are collecting each month.
In conclusion, we understand that the installment mechanism is beneficial for both parties, and as much as customers are benefiting a lot, business-owners or sellers are also benefiting.