With consumers increasingly showing interest in self-care and wellness, the global spa services market is projected to rise from approximately $100 billion in 2024 to nearly $265 billion by 2032. A number of innovations in wellness and destination experiences, personalized therapies, mental resets, memberships and subscription models are fueling growth. Yet, inflation and the increasing costs of services can limit consumers’ purchasing ability.
To address these challenges, spas are taking cues from the medical industry and offering more flexible financing options to consumers through structured payment plans and customized financing programs.
While a large upfront payment for services or products can be a deterrent for many consumers, flexible financing programs and payment plans can be a way for spas and wellness businesses to enable customers to break down payments into manageable installments that may be more palatable.
Over 80% of those surveyed by payments provider NMI indicated it is “somewhat” or “very important” for businesses to offer flexible payment options. Over 40% said it was “very important”, including 53% of millennials and 49% of Gen Z respondents.
Potential Benefits of Consumer Financing for Spas and Wellness Companies
1. Attract new customers by lowering financial barriers and enabling purchases without requiring full payment upfront. Flexibility to pay in installments can make the price of high-ticket products and services more attainable to more customers.
Customized financing programs can also enable businesses to reach a wider audience than with traditional purchasing models, which can exclude customers who may not have available funds to pay for big-ticket items upfront, or who do not have access to traditional credit cards or loans. It can enable consumers with limited disposable income or who are working within tight budgets to make purchases that fit within their financial means.
Moreover, many consumer financing companies have solutions for the full credit spectrum, which can open up opportunities for individuals with non-traditional credit histories or lower scores.
2. Increase sales by lowering the immediate financial burden.
Consumer financing encourages customers to purchase what they want and need now, increasing the likelihood of higher average order values by allowing customers to acquire what they want now within their desired budget.
3. Build trust by demonstrating that the business understands the financial concerns of its customers. When customers see that a business is willing to work with them, it can create a sense of trust, which in turn can foster stronger loyalty and potential for referrals.
4. Compete by offering options. With more medical and wellness companies offering consumer financing, consumers are growing to expect options. Smaller spas and wellness businesses can use financing to help level the playing field. Highlighting financing options in marketing materials can draw attention to unique value propositions and encourage consumers to choose their brand over other competitors.
Businesses planning to offer and manage flexible financing in-house should also address important aspects such as:
1. Regulatory Requirements: It's important to ensure compliance with rules and regulations related to consumer lending laws, which can include complying with the Truth in Lending Act. Additionally, handling sensitive financial data requires strict compliance with privacy and cybersecurity standards, and in some areas, offering credit directly may require special licenses. Businesses need to be aware of these and other requirements.
2. Nonpayment Risks: Handling financing services in-house can expose businesses to the risk of non-payment, which can be costly and resource-intensive. Late or missed payments can add to the administrative burden, increase chargebacks and accrue delinquency costs. Businesses need to ensure processes to evaluate consumers’ ability to pay.
3. Operational Integration: A successful internal consumer financing program should be integrated with point-of-sale and e-commerce platforms. Customer service personnel should be trained to address questions on financing, potential billing errors, interest charges and collections management.
These challenges can often be reduced by partnering with an experienced financial services provider that specializes in payment plan management and receivables servicing. Such partnerships can help businesses strengthen cash flow and reduce the operational complexity of managing financing internally.
Looking Ahead
Increasingly, younger generations in particular are coming to expect payment options that better align with their budgets. As consumer preferences continue to evolve, spas, wellness companies, and others that adapt to market changes will have greater opportunities to expand their customer base, boost sales and build valuable brand loyalty.
