August 26, 2008
Few Options Available for Consumers Seeking Layaways
Walmart gave it up and so have many other retailers. Today, even with a shaky economy, it’s difficult to find retailers who offer layaway programs, according to the Danville (VA) News.
Goody’s and Kmart were the only retailers the paper found who still offer the service.
Creed Williams, a store manager at Goody’s at the Riverside Shopping Center in Danville, said the store’s layaway program was “still a very popular service. Goody’s offers consumers who put down a 10 percent deposit a 30-day layaway option.
Kmart’s layaway program, which also requires 10 percent down, offers shoppers 60 days to finish purchasing the product. Shoppers are charged a $5 layaway fee and another $10 if they cancel the order.
Jackie Younger, acting store manager at a Kmart in Danville, said consumers who use layaway are “good customers, and layaways are how they survive.”
Kmart’s layaway service is particularly popular leading up to the Christmas holiday. “At Christmas, it’s off the hook,” said assistant store manager Debbie Custer. “We have to open three new areas to keep (layaways) in.”
Sears offers layaway but only on selected products such as jewelry and promotional items. They have up to 90 days to buy the item and are required to put a $25 deposit down.
Discussion Questions: Do you see increased demand for layaway programs in the current economic environment? Does it make sense for companies to bring dumped layaway programs back or does the original rationale for ending this service still hold?
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Kmart is certainly gaining no advantage in it or anything else they are doing. The fact that they are still doing it is a real indication that fully grasping today’s retailing–but we knew that, didn’t we?
I can remember my mother doing it with things like winter coats and special items that were more seasonal, etc. It struck me then and still does as an old method of holding something to prevent the retailer from running out rather than as a method of credit. At least that was mom’s reasoning. It was a delayed purchase not a method of making payments until you could actually purchase it.
It’s so outdated and distant of a concept that I had actually forgotten about it. Thanks for the memory! It was a little cool here this morning; I am wondering if I should run out and put a coat on lay-a-way!
Layaways were important when people did not have credit. Regardless of the economy, actual pickups were never a sure thing, resulting in merchandise put back on the shelf after it was most saleable. I don’t think that in 2008 it is a money-making policy but a holdover from a bygone era.
Reading the article, it seemed clear that the reason people use layaway is two-fold and while the financial aspect may have changed because of easy credit and store credit cards there is still a need to have “somewhere to hide the Christmas Gifts.”
So this makes layaway not a financial question but more a product delivery issue. Maybe there is a way for retailers to capitalize on this through their websites by offering layaway on the Internet. By allowing customers to postpone delivery, retailers can move their layaway programs out of the stores while still offering the service. It might even be possible for them to team up with some of the delivery services so that merchandise can be deployed to a nearby distribution center but not actually delivered until the customer specifies.
Layaways are a thing of the past and do not fit today’s retailing mode. Just in time delivery, smaller stock area, seasons that are over before they start. Christmas sales that happen before Thanksgiving, smaller percentage of mark ups and the use of credit cards are just a couple of changes that have effect the offering of layaway.
Interested to note that the only retailer of size that still offer them is Kmart. That should tell you something.
Of course there will be demand for layaways as the recession bites and customers want to manage their depleting cash flows. The risks associated with such payment models also increase in the downturn.
I would bet that if Walmart and every other retailer that stopped handling layaways were honest, they would tell you it is because by the time they handle, store and restock the merchandise they have lost most of their profit margin. Not to mention all of the other problems associated with layaways including lost or damaged merchandise.
For Goody’s and Kmart, it has to be a competitive advantage but I would guess it is a very small segment of the society that actually shops there because they offer layaway.
If a way could be figured out to make payments for a layaway from their home computer and then ship the goods to their house, I think it would be a more convenient option for a lot of people. Right now it is inconvenient for everyone and with easy access to credit, layaway isn’t really viable for most retailers.
Absolutely, with the economy the way it is and many people losing their homes, cars, etc, to high interest rates. Layaway will be popular and widely used among the low income demographics. Layaway also seems to be a popular shopping trend among Hispanics.
Layaways are known to reduce traffic and sales. Customers with items on layaway in a store will hesitate to visit that store during the layaway period. They feel they’ll be seen spending money on other items when they should be paying off their layaway. It’s crazy, of course, because the store employees don’t know if they’ve got something on layaway or not. But that’s human nature. I had a friend who reasoned that if he opened a pawn shop which included a liquor store, he would buy or lend money on stuff and then get the money right back in the in-store liquor operation. Didn’t work as planned. So, he moved the liquor operation directly next door with a separate entrance. Business boomed. His customers simply didn’t want to be seen spending borrowed money on booze.
One more thought: Items on layaway are subject to price reductions if the floor stock is put on sale. People who use layaway watch the ads, and they know when they can force the store to reduce the price on their stored items.
I think it’s an outdated service. First, if consumers are losing their homes and cars due to the economy, they have no business joy shopping and putting items on layaway. Everybody can get credit. If they have 10% or $25 to put down, then they can get a credit card from someplace. With so much pressure on retailers for space and labor, I don’t the see the payoff.
Because most retailers won’t accept layaways, the few remaining retailers have a competitive advantage. One rule often observed by successful tacticians: position your business where the competition isn’t. And most retailers struggle for every percentage point of comp sales. So why trash the layaway crowd?
I agree that layaway programs are a part of retailing-past. Those retailers that still offer layaways, like Kmart and Sears, are clearly struggling to carve out any competitive advantage. But the costs of administering layaways, of carrying the inventory, and the markdowns associated with return-to-stock merchandise make layaways unprofitable.
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Kmart is certainly gaining no advantage in it or anything else they are doing. The fact that they are still doing it is a real indication that fully grasping today’s retailing–but we knew that, didn’t we?
I can remember my mother doing it with things like winter coats and special items that were more seasonal, etc. It struck me then and still does as an old method of holding something to prevent the retailer from running out rather than as a method of credit. At least that was mom’s reasoning. It was a delayed purchase not a method of making payments until you could actually purchase it.
It’s so outdated and distant of a concept that I had actually forgotten about it. Thanks for the memory! It was a little cool here this morning; I am wondering if I should run out and put a coat on lay-a-way!
Layaways were important when people did not have credit. Regardless of the economy, actual pickups were never a sure thing, resulting in merchandise put back on the shelf after it was most saleable. I don’t think that in 2008 it is a money-making policy but a holdover from a bygone era.
Reading the article, it seemed clear that the reason people use layaway is two-fold and while the financial aspect may have changed because of easy credit and store credit cards there is still a need to have “somewhere to hide the Christmas Gifts.”
So this makes layaway not a financial question but more a product delivery issue. Maybe there is a way for retailers to capitalize on this through their websites by offering layaway on the Internet. By allowing customers to postpone delivery, retailers can move their layaway programs out of the stores while still offering the service. It might even be possible for them to team up with some of the delivery services so that merchandise can be deployed to a nearby distribution center but not actually delivered until the customer specifies.
Layaways are a thing of the past and do not fit today’s retailing mode. Just in time delivery, smaller stock area, seasons that are over before they start. Christmas sales that happen before Thanksgiving, smaller percentage of mark ups and the use of credit cards are just a couple of changes that have effect the offering of layaway.
Interested to note that the only retailer of size that still offer them is Kmart. That should tell you something.
Of course there will be demand for layaways as the recession bites and customers want to manage their depleting cash flows. The risks associated with such payment models also increase in the downturn.
I would bet that if Walmart and every other retailer that stopped handling layaways were honest, they would tell you it is because by the time they handle, store and restock the merchandise they have lost most of their profit margin. Not to mention all of the other problems associated with layaways including lost or damaged merchandise.
For Goody’s and Kmart, it has to be a competitive advantage but I would guess it is a very small segment of the society that actually shops there because they offer layaway.
If a way could be figured out to make payments for a layaway from their home computer and then ship the goods to their house, I think it would be a more convenient option for a lot of people. Right now it is inconvenient for everyone and with easy access to credit, layaway isn’t really viable for most retailers.
Absolutely, with the economy the way it is and many people losing their homes, cars, etc, to high interest rates. Layaway will be popular and widely used among the low income demographics. Layaway also seems to be a popular shopping trend among Hispanics.
Layaways are known to reduce traffic and sales. Customers with items on layaway in a store will hesitate to visit that store during the layaway period. They feel they’ll be seen spending money on other items when they should be paying off their layaway. It’s crazy, of course, because the store employees don’t know if they’ve got something on layaway or not. But that’s human nature. I had a friend who reasoned that if he opened a pawn shop which included a liquor store, he would buy or lend money on stuff and then get the money right back in the in-store liquor operation. Didn’t work as planned. So, he moved the liquor operation directly next door with a separate entrance. Business boomed. His customers simply didn’t want to be seen spending borrowed money on booze.
One more thought: Items on layaway are subject to price reductions if the floor stock is put on sale. People who use layaway watch the ads, and they know when they can force the store to reduce the price on their stored items.
I think it’s an outdated service. First, if consumers are losing their homes and cars due to the economy, they have no business joy shopping and putting items on layaway. Everybody can get credit. If they have 10% or $25 to put down, then they can get a credit card from someplace. With so much pressure on retailers for space and labor, I don’t the see the payoff.
Because most retailers won’t accept layaways, the few remaining retailers have a competitive advantage. One rule often observed by successful tacticians: position your business where the competition isn’t. And most retailers struggle for every percentage point of comp sales. So why trash the layaway crowd?
I agree that layaway programs are a part of retailing-past. Those retailers that still offer layaways, like Kmart and Sears, are clearly struggling to carve out any competitive advantage. But the costs of administering layaways, of carrying the inventory, and the markdowns associated with return-to-stock merchandise make layaways unprofitable.