Star sticks with its in-house financing
By Furniture Today Staff -- Furniture Today, August 11, 2003
Houston — Star Furniture, one of the few large furniture retailers still carrying its own consumer financing receivables, has no plans to change.
"It's a profit center," said Melvyn Wolff, chairman and chief executive officer of the Houston-based chain, part of the Berkshire Hathaway stable of home furnishings retailers.
He said Star has carried its own receivables, and managed its own consumer credit risk, for decades, long before its acquisition by Berkshire in 1998. Wolff also said it's just a coincidence that two other big Berkshire retailers, Omaha, Neb.-based Nebraska Furniture Mart and Salt Lake City-based R.C. Willey, also are among the holdouts that run their own credit operations with no outside assistance.
Many other furniture retailers have concluded the rewards from retaining all the financing income isn't worth the risk and hassle of running a credit operation. Mismanagement of credit, or economic changes that could drive up the cost of money or increase consumer defaults, can be costly.
Wolff, however, has confidence in Star's ability to run its own operation. "It takes good management. You've got to separate your merchandising decisions from your credit decisions," he said.
He believes Star has as much or more flexibility in offering finance options as the stores using third-party credit providers. He said the company is keeping pace with the offers prevalent in its markets.
"It's a response to customer demands," he said. "The more customers want, the more they'll get."
