By Powell Slaughter, Contributing Editor
HIGH POINT — Last year’s lingering headwinds and loud headlines this year are potential dampers on consumer appetites for big-ticket discretionary purchases such as home furnishings.
Although a contentious election is over, persistent inflation, interest rates well above levels three years ago and the potential for tariffs to push prices higher play out remain unresolved.
The Consumer Confidence Index reflects that uncertain environment with a 5.4-point January decline, including a sharp 9.7 drop regarding current conditions and a 2.6-point decline in consumers’ short-term outlook for income, business and labor market conditions.
Furniture Today asked several providers of consumer financing to retailers for their take on the economic environment’s impact on consumer appetites for financing home furnishings purchases in 2025, and how to adapt their services to address negative pressure on furniture store sales.
Gauging demand
Versatile Credit’s technology platform currently links retailers and consumers applying for credit to more than 35 lending partners across the primary, secondary and tertiary markets. It might seem consumers with existing debt might be wary of taking on more in light of current conditions, but Versatile President and COO Vicki Turjan said there’s a flip side to that.
“Customers have experienced a sharp uptick in costs for nearly every item in their household budgets since the pandemic,” she said. “That has led to increased awareness of how credit can be used as a tool to complete purchases over time and preserving cash for everyday transactions.”
Now-standard tools such as prequalification streamline the application process along with providing applicants the information to confidently choose the right financing option for their budget and purchase.
“We see households earning over $100,000 are increasingly applying for financing, with many falling into near-prime or no-credit-required categories,” Turjan said. Merchants “must recognize that their customers span a wide range of credit profiles and that failing to provide inclusive, full-spectrum financing risks delivering a suboptimal experience and potentially losing customers who are ready to buy but need access to flexible payment options.”
Economic uncertainty, rising interest rates and inflationary pressures may temper overall desire to engage in retail spending, noted Tony Cerino, senior vice president for revenue at tertiary specialist Kafene.
“That said, economic pressure may drive higher desire for financing compared with purchasing in cash, as consumers attempt to preserve more liquidity in uncertain times,” he noted, adding that LTO’s flexible pricing and return structure have particular appeal right now.
Kaolafi Executive Vice President of Sales Mark Denman, said most of the LTO specialist’s customers plan to finance a purchase this year, with 70% citing high prices as a key driver.
“Furniture remains the top category for high-ticket purchases, reinforcing the need for accessible lease-to-own financing solutions that help leasing customers afford the items they need without delay,” he said, noting that retailers should have a seamlessly accessible set of offerings across the credit spectrum.
A brighter side
While no one has a crystal ball, the cyclical nature of the economy and its influence on consumer purchasing patterns could be in retailers’ favor in the wake of a year that saw the housing market stagger, high interest rates and inflation, and election-year uncertainty put a wet blanket on overall home furnishings sales.
That creates a more positive impetus for financing activity.
“We’re all just guessing, but since we’ve been in a down cycle, we think we could be coming out of that this year,” said Ryan Slobodian, chief of staff at tertiary specialist Snap Finance. “We saw those huge purchases during the pandemic, but those are five years out now.”
It’s worth noting the pandemic sales spike spawned severe product shortages on showroom floors, which left many consumers taking whatever furniture or mattress they could get vs. what they really wanted.
“You’d expect people might be tired of something they bought then, or it might be wearing out,” he continued. “I imagine you’ll see more need-based purchases this year.”
While the Mortgage Bankers Assn. predicts just a 1.5% gain this year and home prices remain high, signs the housing market has bottomed out are encouraging. January inflation remained almost a point above the Federal Reserve’s target of 2% for significant rate cuts, but the prime rate did fall a full percentage point in second-half 2024 since its summer peak of 8.5%.
“It seems (home buyers) are accepting these interest rates as the new reality. Those historic lows are gone, and they are deciding they can deal with it,” Slobodian said. “We think that will encourage more business.”
There’s a bright side for home furnishings even if those potential home buyers stay put, noted Curtis Howse, executive vice president of the Home & Auto platform at Synchrony, which provides financing in the prime space.
The company uses its Prism credit-decisioning system in conjunction with proprietary and partner data to assess credit worthiness beyond the credit score in order to responsibly approve deeper into the credit spectrum than other prime lenders in the space.
“Generally speaking, we’re seeing a trend where homeowners are choosing to upgrade their living spaces rather than relocate,” he said. “This shift is creating opportunities for furniture retailers and financing providers alike and highlighting the role financing options can play to help consumers get the products they want or need.”
Countering dampers
Howse believes financing programs must help retail partners counter three key challenges to consumer appetite for their goods: high interest rates, economic uncertainty and tighter credit markets.
“Higher rates can make consumers think twice about taking on new debt,” he said. “To help, we’re emphasizing promotional financing and flexible payment plans to keep big purchases within reach. When people feel unsure about the economy, they tend to hold back on spending.
“That’s why we’re enhancing our omnichannel financing approach, making it easier for customers to access and manage financing, whether online, in-store, or on their phones. Some lenders are getting more cautious. We’re using advanced data analytics and AI to ensure we maintain strong approval rates while managing effectively.”
Turjan at Versatile Credit cited another barrier as poor customer experience throughout the financing process and the lack of an optimized credit strategy.
“Frustrations around slow approvals, confusing processes or a lack of transparency can lead to lost sales, dissatisfied customers and missed opportunities,” she said. “To counter this, retailers and their finance partners can leverage technology to make the financing process a seamless part of the sales experience.
“This means integrating financing options into every customer interaction, whether it’s in-store via kiosks, tablets or mobile devices, or directly into their e-commerce platforms.”
Turjan added that merchants who integrate financing directly into their POS systems can feed customer and application data into their systems, enabling them to easily leverage financing and customer information for orders.
“These integrations streamline workflows, reduce friction and allow merchants to deliver a more efficient, personalized financing experience,” she said.
Prices are up, savings are stressed, but people still need the essentials to make life happen, Denman at Koalifi believes.
“Purchases will continue, but the use of financing could play an even bigger role for those customers needing access to alternative financing options,” he said. “Retail finance companies can counter this by optimizing approval rates, streamlining the omnichannel experience and providing transparent, flexible options,” increasing sales conversions and offering shoppers budget flexibility.
Seizing opportunity, leveraging tech
What particular opportunities are sources seeing in retail finance this year, particularly as they relate to home furnishings purchases?
Snap Finance’s Slobodian sees great potential in working more closely with retail customers to complement the stores’ promotional offerings with similar efforts on Snap’s end, particularly with focused campaigns such as targeting previous purchasers.
“We’ll see much more lock-step between retailers and their finance partners that will drive more traffic through the door with much more coordinated offerings,” he said.
Howse at Synchrony concurred, noting that such coordination better confronts shoppers’ economic worries.
“Strategic, limited-time offers such as special discounts combined with attractive financing can help encourage purchases,” he said. “Plus, using customer data to personalize marketing campaigns helps to bring back existing customers for repeat business.”
Overall, sources across the board see a big opportunity in ongoing technology improvement and implementation.
Howse, for example, cited seamless digital integration, personalized financing and omnichannel consistency along with expanded partnerships and alternative financing models.
Koalifi’s Denman said leveraging technology drives stronger performance and customer conversion at every step in the financing process.
“This includes streamlining the flow between primary and tertiary lenders for greater efficiency, refining our application technology to reduce friction and boost approval rates, and investing in a seamless omnichannel shopping experience that meets customers where they are—whether online or in-store,” he said.
“With many merchants needing to do more with less, leveraging technology to simplify, enhance and optimize the financing process will be critical,” noted Turjan at Versatile Credit. “This means creating a seamless application and approval experience that reduces friction and improves operational efficiency for both customers and staff,” including consistent access to financing options in-store and online.
“Prequalification, for example, has proven to be a highly effective tool, with nearly two-thirds of prequalified e-commerce applicants ultimately completing a purchase in-store,” she said. “Getting a consumer who is interested in exploring financing options to a ‘fast yes’ can make all the difference in the conversion of a shopper to a buyer.”
Kafene counts this year on technological advancements in customers’ user experience and data-driven insights to offer flexible, inclusive financing solutions quickly and easily.
“With many home furnishings retailers yet to embrace lease-to-own as a viable option for their consumers, now is an ideal time for them to focus on solutions such as Kafene’s, which empower a broader range of consumers, drive growth, and enhance the overall shopping experience,” Cerino said.
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