October 29, 2012
Does Layaway Pay?
A piece on The Wall Street Journal website offers consumers some reasons why they should not put items on layaway.
- The cost of fees (not valid in all cases as some have dropped charges) only works to the advantage of consumers if they spend above a certain threshold.
- Fees associated with layaways are non-refundable, so it’s lost money if the consumer doesn’t complete the purchasing process.
- Additional fees may be charged separately if products are put on layaway at a later date, even if the consumer already has items being paid off over time.
- The purchase price on a layaway item may be higher than the cost of a product during the payment period if a retailer puts the same item on sale at a later date.
There’s no doubt that there’s a market for layaway as more and more retailers have added the service, some just a few short years after discontinuing it. But have the reasons that merchants stopped offering layaway gone away?
Back in 2006, (pre-Great Recession) when Walmart announced it was ending its layaway program (reinstated in 2011), a company spokesperson said, "Demand for layaway service has declined steadily as consumers turn to current options including online shopping, shopping cards and no-cost credit alternatives that were not available when the company was started."
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Discussion Questions
What is the economic argument for keeping or ending layaway at retail? With the economy showing signs of improvement (jobs, housing, consumer spending, confidence, etc.), is it just a matter of time before retailers start announcing the end to layaway programs again?
Poll
The Millennial shopper appreciates layaway because they are the thrifters. They have budgets, they have smaller paychecks and can manage their finances better than us Boomers. If you cater to Millennials, I’d suggest layaway is probably here to stay. If Boomers, probably not as we’d just as soon put it on a card and have it to play with.
Layaways are retail expediencies. They serve a purpose in slow times for many consumers and retailers want purchases from those customers.
Layaways might even be considered a psychological as well as a financial phenomenon. They allow consumers to access items that they otherwise might have had to abandon. But, like life, layaways are most likely short lived too.
Readers of the WSJ probably also know it’s too usuriously expensive to use the services of a cash advance program, rent furniture because Hulk Hogan told you it was a good deal, or put items in and out of pawn.
My point here us that layaway isn’t intended for Journal readers; it’s aimed at a growing tier of customers for whom it is either buy on time or don’t buy at all. One out of every six Americans is living in poverty and improving economic forecasts — unlike rising tides — will not lift all boats.
The ranks of the poor have continued to swell every time the Dow hit a new record. Wealth is being redistributed in America and so any retailer that thinks layaway will go away better be targeting solid middle class shoppers and above.
As a nation, we tend to be in economic denial. We aren’t going to see the kind of middle class wealth formation we witnessed with the post World War II rise of an exploding industrial market. Money just isn’t made that way any more.
Our economy has a few little speed bumps ahead of it — like the care and feeding of an army of boomers — before we can rationally talk about an end to discounting and things like layaway.
This is a program where retailers offering it have created value with their customers. In turn, it is an additional factor in loyalty encouragement.
None of the factors mentioned have actually improved in any real measure. In fact, in some ways they are worsening.
Smart families are using these programs just as those years ago did to get a bit ahead and positioning themselves to meet the needs of their families.
The economy may have urged re-entry into layaway, however, it may have taught those that did, it is a program that never should have left their offering.
Growing up, my parents effectively used this offering to provide for school clothing, winter coats, and the like. Many of these items are on the racks and shelves far before the consumer is ready or prepared to buy. More than just an economic need, it ensured they were available when they were psychologically ready to buy.
The retailers that did this the best earned their loyalty. It ensured return visits. There is much more to this with respect to a customer relationship than just an economic need.
In my opinion, it was just a “me too” reaction to other retailers by offering layaway. This is 2012, not 1950. Everyone has a credit card so there is no need for layaway. Why go through the hassle and red tape of layaway, then go to even more hassle returning to the store? Swipe your card and take it home.
Layaway is a program of convenience. In difficult economic times it enables consumers to buy products without incurring the huge cost of credit card debt. It also encourages buying “hot” items now, while they are still available.
Yes, the economy is improving, but there are still enough consumers using layaway to make it worthwhile. Retailers should reexamine these programs as they look at the 2013 holiday season.
I find this so funny somehow — that the WSJ is advising its readers against layaway. As if.
But…I think layaway will be viable as long as the cost of money for companies like Walmart is low, vs. the cost of money for its likely-poor-credit-risk customers. The issues around it haven’t gone away, but I do think credit card interest rates are high enough to make layaway an attractive option for consumers, and a not-insurmountable inconvenience for retailers.
The big watch-outs are really around sales contests (layaways are a very clever way to game a sales contest system) and inventory hoarding.
Twenty-nine percent of Americans do not own a credit card, according to a 2010 poll report by CreditCards.com. Another study released in the same year by the Federal Reserve Bank of Boston found that 22 percent did not have a credit card.
George and Ryan hit the key points here. Layaway programs aren’t for WSJ readers, they are for the growing percentage of the population for whom the economy is cash based.
Layaway is the present-day cure for the consumers with little or no hope of getting the credit they need to get the things they can afford, but not yet. Timing and item participation are the tools that must be in proper play so as to avoid margin loss, due to storage and return of out dated inventory. All things considered, I am of the opinion that this is a valuable tool to increase or at least stabilize inventory turn rates.
Layaway is a tool for consumers who live paycheck to paycheck. Regardless of layaway fees, this is an important tool for those consumers. Consumers using layaway may or may not be aware of the impact of the fees (depending upon which fees are being charged by which retailer at what time); they do, however, know that this tool allows them to make purchases now and pay small amounts of money over time. Without that option it would difficult for them to purchase the items they want when they need them. Eliminating the tool would negatively affect their ability to purchase so retailers would have to be ready to lose those sales if they eliminate the program.
The economy might be showing signs of improvement, and that will eventually trickle down to consumers. Layaway programs seem to be a win-win for consumers and retailers. Money-tight shoppers can purchase items for the holidays and retailers increase sales. After this holiday shopping season, retailers will need to review the current layaway programs and then decide based upon the economic factors next year and make a decision. I think the layaway programs will be around for a few more years.
According to recent report from the FDIC, the number of American households without bank accounts is rising, from 9 million in 2009 to 10 million this year. That is a pretty significant increase and in addition 10% of American households have no savings accounts.
I know it may be hard to believe for some, including writers for the WSJ, that not all Americans have checking or savings accounts, much less credit cards, but it is a fact.
Lawaway is not a temporary gimmick, it is a valuable purchasing/financing option for many Americans who shop at stores like Walmart, Target, Sears and Kmart.
The economy is not improving for the working class of this country and layaway may be a permanent offer for the foreseeable future.
Ryan and Paula beat me to my first point — how many WSJ readers use layaway? Or put it another way, how many prospective layaway users ever look at the Wall Street Journal?
As others in this panel correctly observe, there is a rather sharp divide in this country between folks with financial options and folks that don’t have many. A large retailer who is paying active attention to the needs and desires of its shopper base may be well advised to make layaway services available.
I would, however, challenge Walmart and others to stand firm against layaway policies that take undue advantage of shoppers. Be transparent about the rules and fair about applying them. Layaway is certainly not charity, but it also should not be an opportunity make customers feel bad about your retail brand.
In general, for most of us — WSJ readers or not — I’d counsel just a little less social pressure for conspicuous consumption during the holidays. Sure I like a vigorous consumer economy as much as anyone, but not to the detriment of folks already in the most distress.
As for all you one-percenters out there — go nuts buying stuff for other people this year. You can afford it. Our economy can use it.
Paula beat me to it (though of course there IS a kind of “layaway” where you put just a few dollars down and take control of a multi billion-dollar company, so maybe the Journal is ramping up to advise on that kind of purchase…). Anyway, as most here have noted, programs of this sort are designed for people who want something, but lack either the credit to buy it with a card, the discipline to wait and/or the intelligence to realize it’s not a good deal. In short, people whose lack of life skills insure that they’re likely to remain poor forever…and I don’t think we’ll ever run out of those.
Who is the WSJ catering to with an article about layaways? Certainly not the people having to use one as a forced payment plan for the holidays. Not everyone who can afford a WSJ subscription can afford a joyous holiday season.
Sales, Sales, and Sales. Giving the consumer a better reason to shop in your store starts with making it easier to purchase any item. This is what layaway does, while at the same time reflecting greater customer service and a better way to sell items to a more diverse set of customers. What is there not to like???
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The Millennial shopper appreciates layaway because they are the thrifters. They have budgets, they have smaller paychecks and can manage their finances better than us Boomers. If you cater to Millennials, I’d suggest layaway is probably here to stay. If Boomers, probably not as we’d just as soon put it on a card and have it to play with.
Layaways are retail expediencies. They serve a purpose in slow times for many consumers and retailers want purchases from those customers.
Layaways might even be considered a psychological as well as a financial phenomenon. They allow consumers to access items that they otherwise might have had to abandon. But, like life, layaways are most likely short lived too.
Readers of the WSJ probably also know it’s too usuriously expensive to use the services of a cash advance program, rent furniture because Hulk Hogan told you it was a good deal, or put items in and out of pawn.
My point here us that layaway isn’t intended for Journal readers; it’s aimed at a growing tier of customers for whom it is either buy on time or don’t buy at all. One out of every six Americans is living in poverty and improving economic forecasts — unlike rising tides — will not lift all boats.
The ranks of the poor have continued to swell every time the Dow hit a new record. Wealth is being redistributed in America and so any retailer that thinks layaway will go away better be targeting solid middle class shoppers and above.
As a nation, we tend to be in economic denial. We aren’t going to see the kind of middle class wealth formation we witnessed with the post World War II rise of an exploding industrial market. Money just isn’t made that way any more.
Our economy has a few little speed bumps ahead of it — like the care and feeding of an army of boomers — before we can rationally talk about an end to discounting and things like layaway.
This is a program where retailers offering it have created value with their customers. In turn, it is an additional factor in loyalty encouragement.
None of the factors mentioned have actually improved in any real measure. In fact, in some ways they are worsening.
Smart families are using these programs just as those years ago did to get a bit ahead and positioning themselves to meet the needs of their families.
The economy may have urged re-entry into layaway, however, it may have taught those that did, it is a program that never should have left their offering.
Growing up, my parents effectively used this offering to provide for school clothing, winter coats, and the like. Many of these items are on the racks and shelves far before the consumer is ready or prepared to buy. More than just an economic need, it ensured they were available when they were psychologically ready to buy.
The retailers that did this the best earned their loyalty. It ensured return visits. There is much more to this with respect to a customer relationship than just an economic need.
In my opinion, it was just a “me too” reaction to other retailers by offering layaway. This is 2012, not 1950. Everyone has a credit card so there is no need for layaway. Why go through the hassle and red tape of layaway, then go to even more hassle returning to the store? Swipe your card and take it home.
Layaway is a program of convenience. In difficult economic times it enables consumers to buy products without incurring the huge cost of credit card debt. It also encourages buying “hot” items now, while they are still available.
Yes, the economy is improving, but there are still enough consumers using layaway to make it worthwhile. Retailers should reexamine these programs as they look at the 2013 holiday season.
I find this so funny somehow — that the WSJ is advising its readers against layaway. As if.
But…I think layaway will be viable as long as the cost of money for companies like Walmart is low, vs. the cost of money for its likely-poor-credit-risk customers. The issues around it haven’t gone away, but I do think credit card interest rates are high enough to make layaway an attractive option for consumers, and a not-insurmountable inconvenience for retailers.
The big watch-outs are really around sales contests (layaways are a very clever way to game a sales contest system) and inventory hoarding.
Twenty-nine percent of Americans do not own a credit card, according to a 2010 poll report by CreditCards.com. Another study released in the same year by the Federal Reserve Bank of Boston found that 22 percent did not have a credit card.
George and Ryan hit the key points here. Layaway programs aren’t for WSJ readers, they are for the growing percentage of the population for whom the economy is cash based.
Layaway is the present-day cure for the consumers with little or no hope of getting the credit they need to get the things they can afford, but not yet. Timing and item participation are the tools that must be in proper play so as to avoid margin loss, due to storage and return of out dated inventory. All things considered, I am of the opinion that this is a valuable tool to increase or at least stabilize inventory turn rates.
Layaway is a tool for consumers who live paycheck to paycheck. Regardless of layaway fees, this is an important tool for those consumers. Consumers using layaway may or may not be aware of the impact of the fees (depending upon which fees are being charged by which retailer at what time); they do, however, know that this tool allows them to make purchases now and pay small amounts of money over time. Without that option it would difficult for them to purchase the items they want when they need them. Eliminating the tool would negatively affect their ability to purchase so retailers would have to be ready to lose those sales if they eliminate the program.
The economy might be showing signs of improvement, and that will eventually trickle down to consumers. Layaway programs seem to be a win-win for consumers and retailers. Money-tight shoppers can purchase items for the holidays and retailers increase sales. After this holiday shopping season, retailers will need to review the current layaway programs and then decide based upon the economic factors next year and make a decision. I think the layaway programs will be around for a few more years.
According to recent report from the FDIC, the number of American households without bank accounts is rising, from 9 million in 2009 to 10 million this year. That is a pretty significant increase and in addition 10% of American households have no savings accounts.
I know it may be hard to believe for some, including writers for the WSJ, that not all Americans have checking or savings accounts, much less credit cards, but it is a fact.
Lawaway is not a temporary gimmick, it is a valuable purchasing/financing option for many Americans who shop at stores like Walmart, Target, Sears and Kmart.
The economy is not improving for the working class of this country and layaway may be a permanent offer for the foreseeable future.
Ryan and Paula beat me to my first point — how many WSJ readers use layaway? Or put it another way, how many prospective layaway users ever look at the Wall Street Journal?
As others in this panel correctly observe, there is a rather sharp divide in this country between folks with financial options and folks that don’t have many. A large retailer who is paying active attention to the needs and desires of its shopper base may be well advised to make layaway services available.
I would, however, challenge Walmart and others to stand firm against layaway policies that take undue advantage of shoppers. Be transparent about the rules and fair about applying them. Layaway is certainly not charity, but it also should not be an opportunity make customers feel bad about your retail brand.
In general, for most of us — WSJ readers or not — I’d counsel just a little less social pressure for conspicuous consumption during the holidays. Sure I like a vigorous consumer economy as much as anyone, but not to the detriment of folks already in the most distress.
As for all you one-percenters out there — go nuts buying stuff for other people this year. You can afford it. Our economy can use it.
Paula beat me to it (though of course there IS a kind of “layaway” where you put just a few dollars down and take control of a multi billion-dollar company, so maybe the Journal is ramping up to advise on that kind of purchase…). Anyway, as most here have noted, programs of this sort are designed for people who want something, but lack either the credit to buy it with a card, the discipline to wait and/or the intelligence to realize it’s not a good deal. In short, people whose lack of life skills insure that they’re likely to remain poor forever…and I don’t think we’ll ever run out of those.
Who is the WSJ catering to with an article about layaways? Certainly not the people having to use one as a forced payment plan for the holidays. Not everyone who can afford a WSJ subscription can afford a joyous holiday season.
Sales, Sales, and Sales. Giving the consumer a better reason to shop in your store starts with making it easier to purchase any item. This is what layaway does, while at the same time reflecting greater customer service and a better way to sell items to a more diverse set of customers. What is there not to like???