Before we get too deep into the calendar year, we wanted to take some time to sit down with Synchrony Financial to help set the stage for 2025. Dave Marsh, general manager for the brand, dives into some of the more important economic indicators as well as the programs and services retailers should tap into to be successful in the new year.

Rob Stott: We are back on the Independent Thinking Podcast and excited to kick the year off with a great partner of ours in Synchrony Financial, Mr. Dave Marsh, the general manager for the Nationwide relationship. Sir, how are you? It’s weird. We’re like before the new year, but we’re talking about the new year, and this is going to publish in the new year, so it’s like we’re planning ahead. This is the ultimate planning ahead. Great within the financial world, this is all you guys do?

Dave Marsh: It is, and it’s a great time of the year. We’re looking at how ’24 is wrapping up, but we’ve been heads down really over the last month or so looking at 25, so this is great timing.

Rob Stott: Good time to talk for sure. Well, you mentioned it, looking at ’24, I know it’s a year, I think most of us want to put it in our rearview mirrors and move into 2025, but just to put a bow on the year and wrap things up, how did it ultimately end up as a year for our retailers in the industry?

Dave Marsh: So I think from a retailer perspective, we’re seeing a rerun of what we saw in ’23. So depending in the industry, we’ve got different verticals within Nationwide, mattress and furniture, they had really, really tough years, but as you look into appliances and consumer electronics, kind of more flat to slightly down, it was absolutely a challenging year and I think that a lot of the uncertainty that we had in ’24, that dust is starting to settle. We’re seeing some green shoots if you will, as we look Black Friday forward. So I think there’s a little bit more optimism for ’25, but still I would say cautious optimism.

Rob Stott: No, it’s a good term for sure. And we say I’ve just got done writing as we’re sitting here too, a blog about the last couple of months of this year and it does seem like we got out of something and there’s a lot of momentum heading into this next year.

Dave Marsh: There really is. Like I said, there was a lot of uncertainty. I also think that as you think about the consumer, the consumer has gone through quite the wild ride over the last couple of years. So you think about the early 2020 to ’22, beginning of ’23, you’ve got a consumer that is flush with cash, and it’s really all about just trying to buy or acquire, get at the merchandise. But that has normalized considerably over the ’23 and definitely into ’24 where that savings rate has come down more to a traditional rate.

And as a response to that, what we’ve seen in our business is the payment rates, so the rate at which consumers pay us back has come back to more normalized levels, which is good for us, it makes for a stickier asset, but it also has created a little bit of a pressure from a delinquency perspective. So if you look across the US consumer, the debt load has increased considerably, savings rate has come down and you would expect that delinquency to pop up and we have seen that. However, the consumer is extremely resilient, and our delinquency rates are at a rate that is very sustainable at this point. So that again creates a little bit of optimism as we move into ’25, and definitely as we hopefully put this period behind us as we look forward even further ’26 I think across the board there is tremendous optimism.

Rob Stott: For sure. And you mentioned a little bit about ’25, so before we get too far ahead of ourselves, what are those things that you are looking for, or sort of the key indicators for how you project the year ahead will go in terms of the industry?

Dave Marsh: So a lot of what we take is macroeconomic data, but we also listen to our partners. So when I say partners, it is the manufacturers, those that provide the product that we sell within our ecosystem that provides the inventory to our members. And we really listen to how they’re creating their production schedules, what they’re expecting, what the product mix is going to look like. There is different levels of optimism and pessimism across the different verticals. What I would say is as that is the key input, again, folks are feeling at least the first half of ’25 will be kind of flat to down, but then we’ll start to see that increase in consumer purchasing in that back half of ’25 to where we start to move to a slightly positive year-over-year view.

Rob Stott: Yeah, I know we hear a lot, and it may be recency bias just watching the news this morning with my coffee, but the things you hear about, well I should say the thing you hear about most often in this space is the Fed, and the interest rate and kind of the expectations for what they’ll do, I know they got a little hampered this week, I think they said they weren’t going to cut as much as they said they were or something like that in ’20. That seems to be, in terms of the coverage, the only thing that gets talked about but obviously there’s a lot more to it than just that.

Dave Marsh: Yeah, there is. Look, there’s a lot of data points that come in and at the end of the day the consumer, they take in those data points and what my take is, they really just want to have a consistent, more positive stream of data coming in and information coming in the Fed is one piece of that. If you really look at the key drivers in the home space, whether it be appliances, furniture, there is a tremendous amount of untapped equity. If you think about interest rates and how that is really impacting the consumer, it’s really looking at mortgage rates specifically.

So mortgage rates are now more at the traditional seven to six and a half percent, and there is a tremendous amount of homeowners that own their home outright, but then also are locked into rates that are around two and a half, 3%. So there needs to be, exactly, right, there’s a lot of us there. So there needs to be a fundamental change in more of the mortgage industry as it relates to people wanting to move and to shift to a different household. At this point in time, it is a hurdle to say, “Well, why would I want to leave what I have, potentially move into something that is at par or maybe less, and it become more expensive?”

So that needs to right size, and as that happens, that’s where we’ll see a return to purchasing big ticket home specific items and I’m talking the furniture, mattresses, appliances and those types of things that our members are exceptionally tied to.

Rob Stott: The other interesting thing too, and I just bumped into a colleague of yours at the Furniture Today Leadership conference down in Florida. I remember he was talking on a panel looking ahead, there’s an influx of, we were looking at the average age of first time home buyers and where they are, and I think it’s crept up a little bit, it’s like 35 to 38 is average age of that first time home buyer. There is a massive, right behind that age, there’s a massive generational wave, if you will, of people that are right on the cusp of being those first time home buyers. So I have to imagine too, that probably influenced, you talk about 26, even a couple of years out, the possibilities that are there for what this industry could go through.

Dave Marsh: And I think that ties to what we’re seeing. I think that that is a portion of the population that all things being equal, if they had the rate environment that again that we were able to take advantage of, they would’ve come into the market and start to participate in those larger ticket purchases. So that’s what I’m talking about is there is that big population and as the rate environment becomes favorable to where inventory can tick up and housing existing homes, that can start to turn, that’s where we’ll start to see more volume in those big ticket home purchases.

Rob Stott: It’s like one of those, we’ve bared the brunt of it. The light is there, it’s just stay the course kind of thing. And it seems like there’s a lot of opportunity ahead, which is awesome to hear.

Dave Marsh: Absolutely, absolutely.

Rob Stott: So honing in a little bit more, world of consumer finance, let’s talk about how things are and the tools and things like that. You mentioned the delinquency and people are using credit more, but which good in your point of view people are using credit, which is great, so are things going well or what’s the temperature right now?

Dave Marsh: Yeah, I would say across the board delinquencies have, I would say more normalized because again, when we were flushed with cash, those payment rates were artificially accelerated, and we’ve returned more to that normal payback rate. So the consumer is resilient, they are strong, and at this point in time, again, all things being equal, we’ll see how they play out. We’re not expecting any drastic decrease. We think that we’re in a point of relative stability. With that being said, from a consumer perspective, the area that we’re really focused on is being able to meet the consumer where they are. And I think we hear that a lot, and I want to provide some color into the way that we think about what that means.

So the consumer at this point in time, they’re generally looking big ticket purchases, online or in some form or fashion doing some investigation several weeks before they actually intend to purchase. So that could be 60, 45 days, again depending on the vertical and they’re looking online to see what is available. Now when I say meet the customer where they are, where credit plays a part in that is making sure that that digital experience allows for the customer to understand and know a couple of things as they’re engaging with a specific merchant.

One, they want to know whether or not that merchant has financing options. And if that is just part of the entry level experience, hey, I see that this merchant has financing, that is a big part because at that point in time, those that are looking for financing, if they don’t see it, they’ll immediately move on. Those that are looking for it, they see it, they continue with the process. As they’re looking at specific items, this is where we’re getting and pulling forward I would say the credit introduction into the sales cycle, we have capacity and digital tools where as the customer is looking at those specific items, it will show them, hey, this item that you’re looking at could be yours for as little as, and then we convert it to a monthly payment.

Monthly payments are exceptionally important because it allows that customer to say, “Oh, okay, I can definitely do this. It’s put in terms that they can look at and have context. Looking at whole tickle price can be overwhelming.

Rob Stott: How much more is it than my Netflix subscription, kind of deal.

Dave Marsh: Exactly.

Rob Stott: It’s crazy.

Dave Marsh: How many visits to Starbucks? And it becomes much more… It becomes something they can understand and not as fearful.

Rob Stott: Accessible even, right? Yeah.

Dave Marsh: Yes. It’s accessible and simple. Everybody likes simple. From there, what we’re focusing on is, okay, the customer understands that there is financing available. They understand, hey, I can get what I’m looking for at X dollars per month. We’re creating a customer experience where it’s exceptionally easy for them to see, hey, do I qualify? So we’re looking at it from two sides of the coin. There are customers that are high credit quality folks, they have multiple options to pay, they can pay cash, they can use their American Express. And on the flip side, we’ve got those that are on the margin and they’re worried, “Hey, I don’t know if I’m going to qualify. I know that my credit score is right there on the edge. I’m looking for a way to see if I’m able to get the credit line without impacting my credit score.”

So what we’re doing is taking a very simple entry point where a customer can see what do I qualify for? Those high credit quality, they want simple. They know, hey, I’m getting $15,000, whatever the case may be, I know that I’m qualified and that can create the higher credit quality customer entry into the financing options. Conversely, from a pre-qualification standpoint, those that are on the margin, they can see, hey, I qualify for $5,000 or in the event that they don’t, then they were able to find out that information without any negative impact to their credit score, which is huge.

Rob Stott: Right. Huge from a credit standpoint. And also huge from I feel like that customer experience standpoint of not having the embarrassment of talking to someone and forgetting that sort of information. But if they are approved too though that then I have to imagine kind of flips the script too, then they know, “Hey, I have this amount of money, maybe I was looking at washer A, the entry level, and all of a sudden now I realize I have more available to me. Maybe I do step it up to a more expensive model.”

Dave Marsh: That’s the benefit. And that’s what we’re seeing with those that are employing this customer experience or this digital experience that we provide. We call it Unifi, but it’s simply providing that customer with, “Hey, this is what the monthly payment is, and this is your pre-qualification.” And I’ll talk a little bit later about the checkout process and options available there, but once somebody sees what they have access to, the percentage of customers that actually go to a higher ticket is substantial and that benefits the customer because they actually get what they want. They don’t have buyer’s remorse two, three months later. Obviously the merchant having the higher ticket, very happy, and then you and I, Nationwide and Synchrony as providers able to achieve that with the merchant and the customer. It’s a win across the board.

Rob Stott: For sure. Now, as far as getting involved with something like this, what’s the threshold for a dealer? What’s required of them to start taking advantage of a program like this?

Dave Marsh: I would say as it relates to connectivity with Nationwide and OneShop specifically, we’ve been working with them the latter part of Q4. We have gone through a lot of work such that those that are converting over from a legacy platform to OneShop adding this Unifi capability is exceptionally easy and it’s really just simply stating, “Hey, I’m converting over from whatever the legacy platform is that they’re on, to OneShop and we can run those. We don not have a bandwidth issues as it relates to implementing that functionality in the OneShop environment.

Rob Stott: That sounds pretty easy. Hey, I want to do this. Yes, that’s exactly right. Check the box. No, that’s awesome. I know it’s not the only tool available out there too, right? You I think maybe started to allude to it, but there’s other financing tools. I know we’re hearing a lot especially recently about things like waterfall programs and things. What other tools are out there that could help in this space?

Dave Marsh: And I think a lot of it goes to from a merchant perspective, you want to put your customer in a position where they’re going to receive some sort of an offer, right? Look, we’re a regulated bank, and we have a set risk appetite that we underwrite to, and that’s the way that we are managed and that’s the way that we’ll continue to move forward. Now what these waterfall capabilities, as you stated, what they do in essence is as a customer, I come in and let’s say I’m not able to pre-qualify and get aligned with Synchrony as a merchant, then I can determine, hey, I want to take that customer and I want to allow them to be potentially underwritten by a Fortiva. So Fortiva is a vendor that both Synchrony and Nationwide utilizes as a second source. So they have an option to look at that customer and determine whether or not they want to provide A credit line for that customer.

And if they are unable to underwrite that customer, then there is a third option. And there are multiple partners that both Synchrony and Nationwide have, whether it be AFF or Progressive, that are more in the lease to own space that they will take on that customer and allow them to make that purchase. So these waterfall capabilities, we’ve implemented literally hundreds of those across 2024 with the various merchants in Nationwide. And it allows for that merchant and more specifically that sales associate, the confidence that when a customer engages with financing, that there will very, very likely be some sort of offer at the end of that process. And that’s been very successful for us in ’24.

Rob Stott: No, that’s awesome. And I know you’ve already alluded to it too in terms of just the benefit of having it. I think when most people think of financing, they think of that in-store experience of it’s something that is visible at the point of sale or throughout the store on signage and things like that. I, know, I want to let you talk about it now, the web experience of that and the importance there. Talk about that a little bit.

Dave Marsh: Yeah, what I would say is consumers want to see a consistent experience as they engage with the merchant. And what I mean by that is as they initially, which is very likely engage with you in a platform, then that needs to be reflective and at the same level that you have in store.

So anytime there’s a disjointed approach, we see that there is abandonment. And so from a digital perspective, having choice. So one, creating the digital experience where a customer understands that, “hey, as a merchant I do have financing. Two, what does that mean from an affordability standpoint, how much is it per month? What types of promotions do I provide to my customers? Those things are essential as that customer makes the choice.

And in all likelihood, it’s still a process where a consumer will engage online, come up with a very completed idea of what they’re going to purchase and then complete the purchase in store. So understanding that the customer has gone through a strong digital experience, and then as they come in store, having that same level of experience and then allowing for the sales associates to say, “Okay, I understand that you’re looking at this basket of goods, you’re pre-qualified for $10,000, you’re looking at this specifically.” That’s really where it allows for a deeper sales experience where they can get into the upsell, the bigger ticket, and then also leverage options and choices from a promo perspective to potentially get that customer with that bigger ticket.

Rob Stott: Yeah, you mentioned it, right? The abandonment. I can’t imagine someone coming into the store and then having those things not match or something, the feeling of just what that does to the customer experience. So just the importance there of having that. I mean, we hear so much about omnichannel and what that truly means, but think about it, you got to put yourself in that customer’s shoes of if you had a certain expectation when you first met this retailer online or had that experience to how important it’s to maintain it throughout, you have a certain level of expectations as a customer. If they get not met at any point, it could result in not what you want, not getting that sale.

Dave Marsh: And that’s especially true with our customer base because we’re talking about multiple thousands of dollars. The average ticket is multiple thousands of dollars and that requires a higher level of confidence and good feeling with the merchant to take that transaction too the completion.

Rob Stott: definitely. I know you dive a lot deeper into some of this stuff too at our primetime shows, which I know we’re coming up on as this publishes, I don’t even want to think about the number we’re closing in on 100 days away. It’s getting close, you’ll be there in San Antonio and a laser, a common thing for you at shows, right? So talk about those a little bit and that experience for you.

Dave Marsh: Yeah, so this last primetime in Las Vegas, we actually did two different shows. So one of the shows that we talked about were the digital tools. A lot of what we’re talking about now, whether it be pre-qual and the impacts there, the Unifi experience and how that allows for the customer to understand affordability, but then also choices that are tied to that. Then we had a separate session that was very successful as it related to multi-source financing or waterfall capabilities. And like I said, we did multiple hundreds of those integrations in 2024 where if you came through our booth, then we would set you up with a pre-qual link that you could simply put either in your store or online. And then also were able to get you in a queue from a waterfall perspective. And we saw tremendous success there and we’re able to implement, like I said, multiple hundreds there.

Rob Stott: That’s awesome. No, that’s incredible. And I know too, I mean we kind of touched on the surface about the impact of some of these things, the numbers you’re able to share, and when you do have it, I’m not saying you didn’t prepare for the podcast, that’s not at all what I’m getting at, but when you get a presentation and you can get in front of these people and show the true impact and have the numbers there for a member that’s offering Waterfall versus one that’s not, and the opportunities there, it’s an impressive thing to look at and understand just the opportunity that these dealers have in front of them.

Dave Marsh: Absolutely. Absolutely.

Rob Stott: No, it’s awesome. Well, Dave, this was great. I think a great dive to sort of set the year up for our dealers. It’s an important topic, one I know we will dive into more of course at primetime, but hopefully throughout the year with you y’all, and it’s good to be able to do it.

Dave Marsh: No, I appreciate it. Look, it’s been a tough but great ’24. We’re looking forward to putting that behind us and moving into ’25, and you have been a tremendous partner for us and we’re looking forward to serving and really growing with our respective members businesses and their customer base.

Rob Stott: That was awesome. Thank you so much. And we’ll chat again soon, for sure.

Dave Marsh: Okay, sounds good. Thank you.