Like the ghost from Christmas past, layaway plans, that quaint vestige of a simpler, less affluent time, are making a comeback. Because of need more than desire. Customers are demanding them because economic circumstances are making it difficult to meet daily living expenses, to say nothing of family expectations for the holidays.
The idea was - and is - that customers who do not have the means to pay in full for a product, can put weekly deposits on it with an eye towards paying it off completely by the time the it is wanted. This enables consumers to buy items they might not otherwise be able to afford and it increases sales for stores who might otherwise lose the sale.
Rather than stir nostalgia, this throws into higher relief the increasing desperation consumers are feeling as the post financial crisis economic downturn ends its third year, with little prospect of growth in sight. JL
Stephanie Clifford reports in the New York Times:
Wal-Mart said on Thursday that it planned to bring back its layaway payment plan for the holidays, an indication that shoppers at the nation’s largest retailer were feeling more and more strapped.
Wal-Mart had scrapped layaway in 2006, saying that so many customers were using credit cards or gift cards that the program was obsolete. Now, though, consumers are demanding it, said Duncan Mac Naughton, chief merchandising officer for Wal-Mart’s United States stores.
It just tells us the customer’s still struggling, as they tell us about their concerns with energy prices, housing prices, the job security, that 9.2 percent unemployment — it tells us that this is a fragile economy and the customer needs our help,” Mr. Mac Naughton said.
Layaway means that a store sets aside a product and requires customers to pay for it over time, usually charging a small service fee but no interest. With layaway, someone living paycheck to paycheck could potentially afford a more expensive item than otherwise, given the extra time to pay for it.
It was a common way to pay for expensive items through much of the 20th century. But as credit cards became popular, layaway dwindled and was mainly used by lower-income consumers who could not qualify for credit cards.
That has been changing in the last couple of years. As the recession hit and the recovery dragged on, some Wal-Mart competitors have offered layaway. Toys “R” Us started offering layaway on expensive items in 2009, while Sears brought back layaway in 2008 after a long hiatus. (Sears Holdings’ Kmart division has offered layaway for decades.)
The other retailers’ jump on layaway puts Wal-Mart into the unusual position of being a holiday season follower. Because of its size, it often sets the standards that other stores follow over the holidays, whether that is pricing on toys or its offer last year of free shipping on hundreds of online items.
Now, with nine consecutive quarters of declining same-store sales in the United States, and having said that improving those sales is a central focus, Wal-Mart is struggling to figure out how to get its consumers to spend. Executives have said throughout the year that shoppers are increasingly shunning credit and paying with cash, and are running out of money at the end of the month.
Wal-Mart’s revival of layaway indicates it does not expect consumers to feel flush anytime soon.
The layaway program will “alleviate the pressures they may have in their homes,” Mr. Mac Naughton said. “We think this is an opportunity for a cash-paying customer to create a payment program on their own time.”
Wal-Mart is limiting the program’s scope and time frame. Only toys and electronics may be paid for on layaway, starting Oct. 17 and ending Dec. 16. Each item must cost $15 or more, and the total layaway purchase must be $50 or more. There is a $5 service fee, and a 10 percent down payment is required.
Other retailers have similar conditions: Sears has a $5 service fee and a 20 percent down payment, while Toys “R” Us has a $10 service fee and 20 percent down payment.
On a site where shoppers can offer feedback to Wal-Mart, layaway has been one of the more popular suggestions.
A commenter by the name of PamS wrote that even when she set aside money for gifts, “the saved money usually gets used for some other unexpected bill or what not; whereas if I was able to do layaway I feel I could better budget and especially for special holidays.”
“I know for some the idea of layaway probably seems silly; but for those of us on very fixed and limited incomes, it does help,” she wrote.
Another commenter, SueH, had a similar view.
“I can’t get many things now either,” she wrote. “I don’t make enough money to pay all at one time. I can’t do extra for my grandkids. Please bring back layaway.”
Other shoppers said they were going to competitors because of their layaway programs. “You would think in this economy every store would have it! During Christmas I have to shop at Kmart cause of the layaway,” wrote a commenter under the name “wishing” on a West Virginia forum.
Mr. Mac Naughton also outlined other plans for the holiday season. Holiday merchandise will hit stores in mid-October, about two weeks earlier than usual, he said. And Wal-Mart will put a number of toys on sale for $15 starting Monday, including some Lego play sets and Princess Toddler dolls from Disney.
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