March 16, 2007
Layaway Makes a Comeback Online
Okay, Wal-Mart decided to do away with layaway and consumers who used the service were really disappointed. It seemed to many that few retailers (Kmart was one exception) understood their financial situation and the real need they had for some form of a layaway program.
Now, a new service called eLayaway is bringing the same type of service online by offering consumers the means to develop a schedule to pay for items over time before they take delivery.
The company currently works with a limited number of smaller merchants including shopperschoice.com, BSP Rewards, BBQGuys, DCS Ranges, Electric Grill Depot, Egg Guys, Outdoor Kitchen Depot, Ultimate Patio, Mermaid Marine Air, Fitness Pro and others including plastic surgeons and those offering outpatient laser eye surgery. The company has said it plans to add many others to its roster although it has yet to snag any big name chains.
The way the service works is a consumers choose eLayaway as their choice of payment when checking out online. They pay an initial 1.9 percent fee upfront for the service and then set a no interest payment schedule that fits with their ability to pay. Once full payment is received, the product is shipped or the service is rendered.
The company claims a number of benefits for the retailers in its program, as well. According to the company’s website, almost half of all Americans spend more than they earn each year and eLayaway gives them the opportunity to attract shoppers that are overextended financially with high credit card debt, etc. This feature alone, eLayaway claims, gives merchants access to new groups of consumers who would never consider making a purchase for many items and services, especially those with high ticket prices.
The payment history of consumers enrolled in the program has an added plus for merchants allowing them access to insights on consumer behavior (identities not included) that will enable them to improve marketing efforts moving forward.
Discussion Questions: Do you see a future for online layaway programs such as eLayaway? Does a service such as this make sense for retailers that have dropped layaway plans or are the issues that caused them to be dropped still exist?
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Any new opportunity to get customers to buy merchandise on terms they feel comfortable with is a smart idea. Depending on the culture of the target or local market, retailers need to listen and respond. In Australia, American retailers who attempted to open stores down under found that their refusal to offer layaway hurt them. In inner city markets, offering customers store credit that they have to come in each Monday morning to pay against the balance, is a acceptable practice, at least in LA. Whatever motivates the customer should motivate the store. eLayaway is a new version of an old philosophy…the customer is always right.
The people who need layaway the most get online the least. eLayaway sets up automatic payments withdrawn from a bank account, so it can’t transact with the target customers without banking relationships. Seems like these factors would limit the target market.
On the plus side, the site offers a purchase option for people with no credit cards or who are maxed out on the credit they have. This may be attractive to some working families.
Retailers who offer home-grown layaway plans are making a trade-off: greater complexity for greater share of wallet. eLayaway appears to offer a means of limiting that complexity while gaining some sales.
Layaways aren’t easy for many fashion retailers. An item might be selected when it’s $49.99, and by the time the layway is paid 100%, the retail is only $19.97 due to markdowns. To the retailer, that $30 markdown is a loss, since had the item been available for sale, someone else might’ve purchased it at the higher price. If the retailer’s prices are stable, it’s easier to make layaways profitable.
Good for online retailers for continuing to strive to figure out what their customers want and how to give it to them.
Working in brick and mortar retail myself, I’m constantly amazed at the practices many retailers adopt that alienate customers.
For goodness’ sake, if customers are requesting layaway, figure out a way to give it them without giving away the store.
I think retailers are confused about things. You don’t have to cave into every customer demand. But reasonable policies developed to support good business practices that are fairly enforced are okay. I really think most consumers get that. So if you put caps on layaway like freezing prices or whatever, I think people would be okay with it.
Whether the need for layaway is large or small to some extent is dependent upon its existence. At QVC, “layaway” is a very common feature of many products and, while I don’t know the numbers, anecdotally it appears to be very popular. I know I avail myself of it any time I can.
Being a smart retailer, QVC sees that I shop that way, and when it thanks me for being their customer, it sends more opportunities to use “easy pay.”
And no, I’m not a deadbeat or a serious credit risk. But I do work in retail (;) and appreciate any opportunity to spread my payments out. It’s a win-win as far as I’m concerned: I get to buy more and they get most of my business because they make that possible.
Isn’t layaway simply a method of extending credit to consumers otherwise unable to obtain it? Whatever the reason…overextention, age, bad credit history…my understanding here is that this option is attractive to the consumer because they have no other way of obtaining the good or service. Or, they don’t really care when they get it.
Actually, this works better for online than for in-store, given today’s supply chain set up. Of course, seasonal or time sensitive merchandise isn’t really appropriate. However, for the bulk of merchandise offered online, particularly for multi-brand retailers, this works. Suppliers already bear the majority of the inventory risk for online, and the ability to defer shipment in the online space allows for JIT supply chain delivery.
The arguments against layaway revolve around opportunity cost of an incomplete transaction. If the vendor holds the inventory, then there was no opportunity cost…the merchandise was never removed from “sale.”
It’s a shame that many stores have done away with layaway. It’s as if Corporate America doesn’t realize that there is a recession going on.
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Any new opportunity to get customers to buy merchandise on terms they feel comfortable with is a smart idea. Depending on the culture of the target or local market, retailers need to listen and respond. In Australia, American retailers who attempted to open stores down under found that their refusal to offer layaway hurt them. In inner city markets, offering customers store credit that they have to come in each Monday morning to pay against the balance, is a acceptable practice, at least in LA. Whatever motivates the customer should motivate the store. eLayaway is a new version of an old philosophy…the customer is always right.
The people who need layaway the most get online the least. eLayaway sets up automatic payments withdrawn from a bank account, so it can’t transact with the target customers without banking relationships. Seems like these factors would limit the target market.
On the plus side, the site offers a purchase option for people with no credit cards or who are maxed out on the credit they have. This may be attractive to some working families.
Retailers who offer home-grown layaway plans are making a trade-off: greater complexity for greater share of wallet. eLayaway appears to offer a means of limiting that complexity while gaining some sales.
Layaways aren’t easy for many fashion retailers. An item might be selected when it’s $49.99, and by the time the layway is paid 100%, the retail is only $19.97 due to markdowns. To the retailer, that $30 markdown is a loss, since had the item been available for sale, someone else might’ve purchased it at the higher price. If the retailer’s prices are stable, it’s easier to make layaways profitable.
Good for online retailers for continuing to strive to figure out what their customers want and how to give it to them.
Working in brick and mortar retail myself, I’m constantly amazed at the practices many retailers adopt that alienate customers.
For goodness’ sake, if customers are requesting layaway, figure out a way to give it them without giving away the store.
I think retailers are confused about things. You don’t have to cave into every customer demand. But reasonable policies developed to support good business practices that are fairly enforced are okay. I really think most consumers get that. So if you put caps on layaway like freezing prices or whatever, I think people would be okay with it.
Whether the need for layaway is large or small to some extent is dependent upon its existence. At QVC, “layaway” is a very common feature of many products and, while I don’t know the numbers, anecdotally it appears to be very popular. I know I avail myself of it any time I can.
Being a smart retailer, QVC sees that I shop that way, and when it thanks me for being their customer, it sends more opportunities to use “easy pay.”
And no, I’m not a deadbeat or a serious credit risk. But I do work in retail (;) and appreciate any opportunity to spread my payments out. It’s a win-win as far as I’m concerned: I get to buy more and they get most of my business because they make that possible.
Isn’t layaway simply a method of extending credit to consumers otherwise unable to obtain it? Whatever the reason…overextention, age, bad credit history…my understanding here is that this option is attractive to the consumer because they have no other way of obtaining the good or service. Or, they don’t really care when they get it.
Actually, this works better for online than for in-store, given today’s supply chain set up. Of course, seasonal or time sensitive merchandise isn’t really appropriate. However, for the bulk of merchandise offered online, particularly for multi-brand retailers, this works. Suppliers already bear the majority of the inventory risk for online, and the ability to defer shipment in the online space allows for JIT supply chain delivery.
The arguments against layaway revolve around opportunity cost of an incomplete transaction. If the vendor holds the inventory, then there was no opportunity cost…the merchandise was never removed from “sale.”
It’s a shame that many stores have done away with layaway. It’s as if Corporate America doesn’t realize that there is a recession going on.