In the face of economic uncertainty (and the typical weight of an election year cycle), independent retailers have a number of different levers they can pull to not only protect their business, but ensure that they realize meaningful success this year. We chat with Chris Kirk, senior Vice President of business and financial services for Nationwide Marketing Group, about the various tools at retailers’ disposal and where the biggest opportunities exist.

Rob Stott: We are back on the Independent Thinking Podcast and blessed today to be joined by Mr. Chris Kirk, our SVP of Business and Financial Services, to help kick off a new year of podcasts. Episode two. So you have to follow up PJ, just so you know, in order. He was our season premiere, so you got it in you to follow him up with a good episode?

Chris Kirk: I’ll do my best, Rob.

Rob Stott: Awesome. Well hey, I appreciate you having the time and availability and I know our members are going to appreciate the opportunity to hear from you as well. So let’s start off, how are things? How are you doing?

Chris Kirk: We’re good, man. We’re at the end of the year, right? I think it’s been a tough year for everybody, so I know we’re ready to see it come and go. It’s brought some challenges to us. It’s brought some opportunities as well, but always looking forward to what we can do better and I think that’s what ’24 is going to bring for us.

Rob Stott: So, I mean everyone’s felt it, right? We’ve all been through it, but I think I told PJ the same thing almost. You could probably direct quote me from the previous episode, but end of year is always a good time to look back but also look forward a little bit as well. So I love doing these this time of year for that exact reason. Might not want to look back. It’s one of those years you want to put in the rear-view mirror, just go forward, put the pedal to the metal. But to kind of recap it, I know we all lived through it, but how did it go in terms of expectations? Was it better? What are you guys seeing?

Chris Kirk: Yeah, so it’s kind of a mixed bag and it looks at what different service you’re looking at, so it’s kind of focusing on financial services. Consumer finance for the membership was up, we had almost double-digit growth this year. It’s not too surprising, the zero interest, no interest finance offers. They resonate right now. If you look at your car rate or your home rate, everything’s gone up. So if you have a 0% offer at 18-24 months, customers are naturally going to be attracted to that. So we’ve seen an increase in applications and dollars and the members that have leaned into consumer finance and promoted it on their website and offered it in-store and really got, you probably heard Patrick say, back to the basics. But presenting that early and often to those customers has driven some results and some good results and our members needed it.

We’ve seen the average sale price increase as well, so everything about consumer finance other than the rates to the members. So yes, we know what happened with the Fed rates and historic increases over the last 18 months and some of that’s been passed through. We were able to mitigate a lot of it from Wells and Synchrony from our partners in there, but we did have rate increases last year. Not surprising. We just heard the Fed mention the outlook for next year though that they’re looking at some rate decreases. So we will see where that ends for next year and look at ’24, but for now we’ve been able to hold as Nationwide our promotional rates for the members. So any supporting vendor that we have, we’ve kept our promotional rates the same even though that everyday standard rate did increase some this year.

Rob Stott: Talk about that you’re kind of diving into surface level, but for those that might not … The benefit of the group. There are those rate increases, but talk about that and what … It’s negotiating, but what can you tell members about what work goes on behind the scenes to make sure or the power of the group, being about to leverage …

Chris Kirk: The power of the group is really just aggregating all of the members and their volume and collectively going as one voice to our bank partners and they truly are partners. Synchrony and Wells do a great job with us in figuring out what’s best for the members when they can handle these rates. No one likes to give them, no one likes to receive them, but we mitigate those as much as possible and we use our billions of dollars in finance power to negotiate and hold out those rates as long as we possibly can.

Rob Stott: No, I think an important thing to reinforce, right? Because it’s one of those, it’s what you do, but it’s kind of taken for granted I’m sure at times, right?

Chris Kirk: Yeah, absolutely.

Rob Stott: There were challenges, so what are some of the opportunity areas that you saw over the past 12 months that you … I don’t know if it’s maybe focused on the more going forward, but areas that you’d like to see some improvement as we head into ’24?

Chris Kirk: Product protection’s been an area that’s followed our units down. So as you look at your units down the attachment rate on appliances, which is where most product protection occurred for us, there is some in furniture and bedding, but I still think there’s some opportunity there. Still coming out of COVID, I’m concerned, I think the industry’s concerned about the parts and labor that created and built some of those products. So I think it’s a good opportunity. They got whatever part they could get, whatever switchboard they had, anybody they could on working on the line, putting those pieces together and they got the products out so it took longer than any of us wanted to. But knowing all that feels like a great opportunity to increase your attachment rate and there’s a huge margin opportunity for members that really lean into product protection and offer an extended warranties on all their products.

Centricity is our partner. We are a third-party administrator that administers our EPIC program. They’ve done a great job. I think over the last 12 or 18 months they had some new leadership come in. Ted Morthy’s done a really good job, bring in a new life to that company and we’re revising, refreshing all the way from the ground up. So excited to see what that team will do, but I feel like there’s a lot of opportunity left for members and if it’s not EPIC or one of our other partners that we have within Nationwide, whoever you’re using, I think there’s a lot of opportunity to continue to push those extended warranty programs.

Rob Stott: You mentioned, it’s one of the things I ask it knowing the answer, but it is like one of those things you brought a different sort of explanation to it because I didn’t even think about it from the … They were pulling whatever parts they could to make these appliances and whatever it was to get them out the door. I’m sitting here thinking from the consumer side too, as budgets tighten and they are making these purchases, they’re not going to want to make it again. So it feels like a really easy sell from “Hey, if you don’t want to bash the product you’re trying to put out the door because of how it was made. Instead you could turn that conversation around and talk about the benefit to the consumer not having to shell out extra dollars if something does happen to go wrong.”

Chris Kirk: Absolutely. It’s a better experience for that customer. And another opportunity, Rob, thinking about better experience for the customer. As we’ve seen credit card utilization for customers at, I think, historical highs, I don’t think they’ve ever been this high. Credit card balances have remained this high for customers. Knowing that your FICO score is predicated on your credit utilization. So we’re starting to see a decrease in FICO storage scores, which is going to translate into a decrease in approval rates for your primary, like your Wells and Synchrony and First Consumer. We’ve worked hard with Synchrony and Wells to have waterfall programs where a customer comes in and has a pretty frictionless, seamless experience where they put in their information, how much they make their social security number address, all that jazz, and then if they get declined from one of those primaries, then it’s automatically gives that customer an option to kick to a secondary or tertiary lender.

So as knowing everything I just said, right, making sure you have one of those options and sometimes secondary or tertiary options, our members don’t always lean into. There’s a stigma most out there about having these lenders out there, but I know it’s going to become more and more important that members consider having this and give that customer who needs to make that purchase another option because they didn’t get qualified for their first and they don’t have the savings sitting in their account to go make that purchase. We’ve seen on the merchant side, duress purchases are at an all time high right now, so higher than they’ve ever been. Washing machine breaks, I need a new one, refrigerator’s dead. Give that customer, make sure we have an option for that customer to walk out and make that purchase inside your store.

Rob Stott: No, that’s I think a truly important thing. I don’t know if it was officially rolled out in August. I feel like we were talking about it before August, but August felt like the launch point for when these programs might’ve been officially introduced.

Chris Kirk: Yeah, Synchrony has been working on it for a while. They built theirs in house, so it’s all through their business center in house. And right now they stop at a secondary and Genesis and they’re working on their third leg, which would be a lease to own provider in there. Wells Fargo went in contract with a third party who has a seamless integration in theirs and has all of the lenders already built out and ready to go. So both the providers have been out there and these waterfalls aren’t new. They just haven’t always been created directly into the primary lender, which I think is going to take away this extra friction or expect it to.

Rob Stott: Correct me if I’m wrong, but the consumer benefit too, it’s sensitive to them. It’s something where they can go through all this privately and it’s not like they get declined at the counter when they’re trying to apply and that sort of stuff. So there’s more to it that’s a benefit obviously for the retailer who can get that customer approved one way or another, but to the customer as well, something that they can kind of talk them through and help them understand the benefits of that process.

Chris Kirk: Yeah, great point. They can do it on the privacy of their own phone actually, so they can scan a QR code in-store, start to fill that out. That helps drive that customer’s purchase decision right then knowing that they’ve got and typically raises or ASP in the store knowing that they can spend $4,000 or $5,000 or whatever that granted limit was. Yeah.

Rob Stott: Have you seen any good examples of members that have implemented those programs in their stores or that are doing it really well?

Chris Kirk: Yeah, there’s several of them.

Rob Stott: What kind of size? You don’t even have to call them out by name, but how are they setting it up or what are they doing to have success with it?

Chris Kirk: Couple of different things. One is we will help provide all the POP material with the QR codes that scan directly into their own personalized portal where they can start that application online. So they have printed materials, they can have POP pop-up tents they can have at the register, and we also have using Nationwide’s Prime Media, we also have it where we can tie it into our digital signage network. So you can have that on the TVs inside the store talking about no interest financing offers and then a QR code that would link directly to that application.

Rob Stott: Well, you talk about, I love the Omni-channel experience and having that as part of the conversation around what that in-store experience could look like. Those pop-up signs around the store almost feels like banner ads that are on a website, they’re everywhere, but they need to be, you got to continue to see it. So it’s just sort of, there’s subliminal messaging as you’re walking around the store about these opportunities.

Chris Kirk: And they work too, right? There’s a silent salesman in there and we’ve done some A-B testing old members of have them and don’t have them, and it’s night and day the number of applications that come in when you have those inside the store. You got to have them. You got to let your customers know that it’s an option.

Rob Stott: Oh, that’s awesome. Any other areas, could be a yes or no to this, but any other areas that you’d call out to a member that would be great for them to focus on in the new year? We’ll get to kind of the economic conditions moving forward and what you’re hearing, but is there a good chance or is right now a good opportunity for them to focus on anything else?

Chris Kirk: It’s a good question, Rob. There’s so many. We have about a hundred different business financial services that we offer the group. Financial services seems like the low hanging fruit, just knowing everything that we just went through with the economic factors that are out there, but it’s always a good time. We’ve got great point of sale partners that are out there and making sure you understand all the benefits that we can bring from there and those tie into our prime metric system and all the data utilization that comes from there and the information to make better choices on the merchandising side. Digital price tags have been big for us this year and the increased adoption of those tags and the labor and the savings that members are seeing from not having to print out those tags and always sure that their pricing’s correct across all different channels or touched on those customers.

Our service leaders network team has done a phenomenal job in the last 18 or 24 months really bringing together and uniting that self-servicing dealer and making sure they have competitive labor rates, sharing peer-to-peer networking. I’ve just been amazed at the job that’s doing for us and helping out that channel that needed some help, quite frankly. Right? Because coming out of COVID again, that’s when we really realized there was part shortage on getting those parts that we talked about earlier for product protection, but they’ve done a really, really good job bringing together all the distributors and making that a much, much easier painless process for the members.

Rob Stott: Yeah. What’s clear is that, to your point, there’s a lot, right? There’s a lot that you and your team are doing. Might be helpful from your perspective, too. What would you tell a dealer, since there is so much, what’s a good way for them to approach this category, these business and financial services or evaluate themselves and where they should put their focus? I mean, they’re sitting here probably thinking, “That’s a lot for me to try to figure out where I need to put my efforts.” So what would you tell them?

Chris Kirk: Yeah. I think we’re really good and always trying to get better at listening. So I think the members that have plenty of retail problems and they can quickly point out to us where those biggest pain points are and we can help go solve those problems for them, our member support team, member support managers, everybody on Patrick’s team that you spoke with last week do a really, really good job of listening first and then understanding what those pain points are and where we think we can help them and can also do a complete analysis of their business and say, “Hey, I see some holes here. Have you done this?” Primetime is probably I think the best place to go see it. It all kind of comes together. We’ve got most of all of our service providers there. You have your merchants there, you have your NLA courses. You’ve been there, you do all your podcasts from there. It’s a huge sticking point and bringing all the different components that are Nationwide and making it real easy for as easily can for members to understand the true value of the group.

Rob Stott: It’s like a fresh aha moment every six months really to do that. I mean, you see, and we talk to each other frequently, right across the business units and everything, but to see even for employees, for Nationwide staff coming together, the team, it’s always a big aha for us as much as it is for members that attend. I’m sure.

Chris Kirk: Yeah, it’s fun to watch any new employees that join the group and they kind of get components of it and they’ve met with people on Teams a lot like this. And then you get to primetime, you’re like, “Oh my god, I get it.”

Rob Stott: “It makes sense now. It makes sense.”

Chris Kirk: Light bulb.

Rob Stott: It’s incredible. No, but to summarize that, what you’re saying is it’s important for members to know that there is a lot, right? There are so many services that whatever your challenge is, we probably have a solution for it. And even if we don’t, right, and I think Tom even said this back on the stage in Nashville this past August, if we don’t have it, we’ll work with you to go out there and find it. So even if it’s a problem that we haven’t necessarily faced yet with a member or one of our independent retailers, something where we’ve got the team and support on a team like your business and financial services team to go out there and tackle it for you or with you.

Chris Kirk: And a lot of them come just from that, from members. So I’d say we typically add anywhere from four to eight new vendor partners a year. And it’s most of them, or not most, but probably about half of them are recommendations from members of a program that they’ve had that really worked for them and they want to share it with other members. We’ve set up these regional meetings in January and a lot of that’s feedback from those members of those challenges that they’re facing in their day-to-day market. Rarely are they ever alone, that you have this one problem by yourself and you’re the only retailer that’s selling everything in our categories that’s facing this challenge. So if we listen to those members, they tell us what those problems are, we work together as a group to go solve them.

Rob Stott: Just me trying to develop a soundbite, there’s probably more likely to hit the Mega Millions or Powerball than you are to not be able to find someone that has the same problem as you in this group. It’s unbelievable. But so looking ahead to ’24 economic wise, obviously you’ve got your finger on the pulse. You are talking with these Wells and Synchrony and all of our other financial partners throughout the year and seeing what’s going on. So what are the sort of conditions that you’re hearing? And I know Wells does, they all do their quarterly economic updates, so what have you been hearing and what direction are we heading to as we get into ’24?

Chris Kirk: Yeah, so great point on the Wells Economic Outlook, we do those quarterly through the Wells Fargo, the CPF, the inventory finance team helps pull those together. They’re pretty industry specific and I’m no economist and will never pretend to be one. So I would highly recommend if anybody’s listening, it’s not tuned in to, those are posted on Member Net every quarter with links to get in there and listen to the true economists tell about what they think is going to happen. They’re still pretty bullish on some type of recession happening. That’s very different than what we heard or I heard the Fed say just like this week about the outlook for next year and the freezing or lowering even of interest rates. So I think it kind of depends on who you talk to. It seems like it’s been like that for the last 18 months.

Some people say we’re out, some people say we’re halfway in. So I think there’s still some uncertainty there and that uncertainty causes for me, and I think for other people, just more uncertainty like what’s going to happen? So it just kind of keeps spinning. I’m pretty optimistic about next year and us coming out ’23. I think everybody’s felt traffic’s been down, they’re coming off two really, really good years where customers were just pouring in. We had our unfair share of discretionary dollars because nobody was traveling and all the stuff I think most everybody’s heard before, but ’20 and ’21 and even some of ’22 we’re much easier. And we’re having to go back to, I said earlier, back to the basics to fight for those customers, you’re having to advertise, you’re having to compete against big box stores that are just slashing their prices and killing the margin out of programs that we’ve been making money off of for the last couple of years.

So it’s going to be interesting. We’ll see what happens with the housing. The demand still seems there. The interest rates are where they are right now, but those could be coming down and creating more interest again for next year. So I think it’s just going to be important. We just keep on keeping on like we’ve done for so very long. I have faith in the independent channel more than any other group. We’re going to get there.

Rob Stott: Yeah, it’s a resilient bunch and I feel like I’ve had this conversation specifically a couple of times, if not even this in this format, but just in phone calls, you look at those last two years, I feel like economists see the numbers and the direction, they love looking year over year, and we’re coming off of two pretty historic years in terms of spending and how willing customers were and how much discretionary money they had available to them. So to comp year over year against historic years, there’s going to be a little bit of a pullback. So it’s just natural.

But at the same time, even to your point in the face of all those dire expectations from economists, you look at we’re, we’re still, as we’re talking, in the middle of the holiday season, there’s still some pretty historic spending during the holidays. So customers out and about traffic wise online and in store moving around, you look at those Adobe analytics reports that come out and National Retail Federation, they were showing pretty fantastic spending. So the consumer continues to, as resilient as independents are, it feels like the consumer has continued to be resilient as well, despite all the predictions and everything that’s out there. So no, awesome to hear that insight and for as confusing as it is to everyone else out there, it’s I guess important to know. It’s confusing to us too. Consumers are going to keep doing what they do.

Chris Kirk: We sure hope so.

Rob Stott: We can only hope. But no, this was a great opportunity. I think maybe we need a Quarterly Kirk Update. Quarterly Kirk. That sounds fun, doesn’t it?

Chris Kirk: I love that.

Rob Stott: That’s got a catchy ring to it. No, that’s awesome man. Well, we appreciate the time and maybe look forward to catching up with you in the next quarter.

Chris Kirk: I look forward to it, Rob. Thanks for having me on, man. Really appreciate it.