What items are consumers buying using hire-purchase schemes or store credit agreements?

Which sections of the population are most likely to make spontaneous in-store purchases on the back of credit agreements?

What encourages consumers to buy using purchase or credit schemes?

This report examines the point-of-purchase finance market in the retail sector. Essentially, this includes instalment credit or interest-bearing fixed-term loans, interest-free credit, buy-now-pay-later deals (otherwise known as deferred payment), hire-purchase agreements and mail order credit. Except for the latter, these forms of credit are arranged in-store at the time of purchase, and are generally confined to big-ticket retailers in the furniture, carpet, electrical goods and DIY sectors.

What items are consumers buying using hire-purchase schemes or store credit agreements?

Which sections of the population are most likely to make spontaneous in-store purchases on the back of credit agreements?

What encourages consumers to buy using purchase or credit schemes?

This report examines the point-of-purchase finance market in the retail sector. Essentially, this includes instalment credit or interest-bearing fixed-term loans, interest-free credit, buy-now-pay-later deals (otherwise known as deferred payment), hire-purchase agreements and mail order credit. Except for the latter, these forms of credit are arranged in-store at the time of purchase, and are generally confined to big-ticket retailers in the furniture, carpet, electrical goods and DIY sectors.

Retail credit is an important marketing tool for retailers. In 2001, approximately 15% of total sales of durable household goods were made on instalment credit or other POP finance credit deals. For some leading retailers of household furniture, the penetration of retail credit can account for as much as 50% of sales.

Roughly 74% of the credit offered by retailers is funded by four finance companies - First National, GE Capital, HFC Bank and Black Horse. The market is thus fairly concentrated, but it is also very competitive, with several up-and-coming companies making significant inroads in recent years. The market is also under increasing pressure from credit card and personal loan companies offering competitive rates of interest. Indeed, Mintel's research shows that while around 19% of consumers who last purchased an item costing more than £500 paid for it with a retail credit or hire-purchase finance agreement, 24% paid by credit card and the majority (52%) paid instantly with cash, cheque or debit card. While this suggests a fairly healthy take-up level for retail credit - with one in five consumers signing up to some form of credit agreement when they last spent over £500 - it does not show the full picture.

Increasing competition, low inflation and a fall in demand for new computers have all taken their toll on the retail credit market. Annual UK sales of store goods on instalment credit or other point-of-purchase finance has fallen over the past two years. This report will examine more closely the reasons for this, by drawing on a range of sources and statistics. The other main areas explored are market factors, market size, the main players and market share, products and pricing, distribution and promotion, and consumer behaviour and attitudes towards POP finance and retail credit. The report concludes by examining future developments and presenting market forecasts to 2006.

Although the report touches on the related topics of store cards and car finance, these are not covered extensively here since they are the focus of two separate reports: Affinity and Loyalty Cards, Finance Intelligence - UK Report, September 2001 and Car Finance, Finance Intelligence - UK Report, May 2001.

Other Mintel reports of relevance to this market include:

- Personal Loans, Finance Intelligence - UK Report, January 2002

- Sub-prime lending, Finance Intelligence - UK Report, October 2001

- Credit and Debit Cards, Finance Intelligence - UK Report, August 2001

- Creditor Insurance, Finance Intelligence - UK Report, April 2000.