Retailers Devise Novel Ways to Revive Sales
By STEPHANIE CLIFFORD
Published: July 4, 2010
Tired of waiting for spending to rebound on its own, retailers are taking matters into their own hands. Stores like Sam’s Club, Target, Toys “R” Us, Staples and Office Depot are offering unconventional promotions meant not only to attract visitors to stores, but also to get them feeling profligate.
Michael Golata, a contractor for United Parcel Service, was approved for a small-business loan offered through Sam's Club.
“A lot of the government programs have come to an end,” said David Bassuk, a managing director in the global retail practice at AlixPartners, a financial consultancy. “So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their own wallets to give money back to the consumer.”
Persistent unemployment nationwide is threatening to inhibit consumer spending. The latest figures from the government on Friday underscored the depth of the problem, with the economy adding only 83,000 private sector jobs.
There was no relief in sight from Washington, either. Congress left on recess Friday having failed to pass legislation that would have extended unemployment benefits for hundreds of thousands of Americans.
On the small-business side, credit concerns are keeping some companies from spending. And on the consumer side, while spending and confidence numbers continue to be weak, personal income has risen for three months straight and savings rates are relatively high. That suggests people now have cash but are just sitting on it.
Against this backdrop of uncertainty, retailers are taking bold steps. Of the over-the-counter stimulus plans, the one at Sam’s Club is the most unusual.
Sam’s began testing the program in May and will soon start marketing S.B.A. loans of $5,000 to $25,000 for its members nationwide. Superior Financial Group, which is managing the loans, gives Sam’s members a $100 discount on the application fee, and lower interest rates, because of how much business it expects through the arrangement.
The company says it does not expect the program to be a big moneymaker, though it earns $50 for each financed loan. The point is to get customers spending more freely — and, it hopes, spending at Sam’s Club.
Michael Golata had been watching his spending carefully. As a contractor in Louisville, Ky., for United Parcel Service, he drives emergency medical equipment to hospitals when M.R.I. or CT scan machines break down.
When he asked U.P.S. if more routes were available, the company told him there was so much work that he should bring on as many drivers as he could afford. There was just one problem: Mr. Golata owned one truck, and he was driving it all the time. Online, he had found a used white Dodge Sprinter for $12,500.
With just a few thousand dollars in cash, he tried to get a bank loan but was denied by two local banks because the truck was too old and had too much mileage. He decided an S.B.A. loan would be too much trouble, and he rejected as absurd a loan from a commercial finance company with a 21 percent interest rate and payments of $450 a month.
About a month ago, Mr. Golata, a Sam’s Club member, clicked through the retailer’s Web site and found a page describing S.B.A. loans offered by the retailer. He filled out an online application, and, by the next day, got a phone call from Superior Financial telling him he was approved for a $10,000 loan, with an interest rate of 7.25 percent over 10 years.
“It made the payment, like, $118 a month. I thought I was dreaming,” Mr. Golata said. Mr. Golata immediately bought the Dodge, and hired three drivers. He went from billing U.P.S. $3,000 a week to $8,000, he said.
Go there Read more...http://www.nytimes.com/2010/07/05/business/05loan.html?_r=1&partner=rss&emc=rss
Don
No comments:
Post a Comment