August 22, 2013
Will Walmart’s Layaway Plan Deliver a Christmas Sales Increase?
Not much has changed since Walmart brought back layaway in 2011 after having discontinued the program in 2006. Two years ago, the company was struggling to improve same-store sales performance as many of its core customers faced personal financial challenges. Walmart has announced it will offer layaway again for the upcoming holiday season with a few program changes from the past.
This year, Walmart will offer layaway without the $5 program fee it charged in 2011 and ’12. The down payment requirement will remain the same: $10 or 10 percent of the purchase, whichever is greater. Customers will have 90 days to pay down their layaway items this year versus 60 days during last year’s holiday season. The retailer will offer an additional 1,000 items on layaway this year versus last. While Walmart didn’t charge customers who cancelled their layaways in 2012, it will cost customers who do so $10 this year.
Walmart gets ready for the upcoming holiday season having just reported a decline of 0.3 percent in same-store sales during the second quarter. The company also reduced its annual outlook on concerns that its customers will continue with their frugal ways.
"Times are tough and it’s not easy for many Americans — they are watching every penny," said Duncan Mac Naughton, Walmart’s chief merchandising and marketing officer, in a statement. "All year long, but especially during the holidays, our customers need a low price leader. This year, we are committed to doing everything we did last year to help Americans save money — plus more. More savings, more layaway items and our commitment that they can give their families a great Christmas on a budget."
BrainTrust
Recent Discussions
Discussion Questions
How important is layaway to consumers’ perceptions of a retailer’s price position? Do you expect more retailers to add layaway as a payment option during the holidays?
Poll
Layaway isn’t relevant for every retailer, but it’s apparent from the Walmart sales trend that this is a key tool heading into the 4th quarter. Whether their problems are entirely macroeconomic—higher payroll taxes straining their customers’ budgets, and so forth—is a matter for debate, but it’s hard to argue with the importance of this program for Walmart.
I have never used layaway and I’ve never known anyone who has since 1980. We have become a same-day-delivery society and when when we want something, we want it now. I think for most people, if they don’t have the funds now they just put in on their credit card. If retailers do add layaway, it’s more for the press release just to get their name in the paper.
However, I think most retailers don’t want to bother with it. I worked for F.W. Woolworth years ago and the number of layaway customers was minimal. Often the customers never returned to pick up the product.
The FDIC Unbanked/Underbanked Survey released in September 2012 states that 1 in 12 households (approximately 17 million adults) and 20.1 percent of US households (51 million adults). This is certainly a sizable market of adults who likely find layaway a convenience at a minimum and quite possibly a necessity to make larger purchases. My expectation is that these individuals also make up a reasonable portion of Walmart’s customer base.
It might not be for the Saks crowd, but I would expect that retailers who target these customers will continue to expand their layaway offers.
Layaway is not important to every consumer. Nor is it something every retailer needs to have as a service. Walmart, and other large box retailers like them are businesses in which layaways could be an additional profit center.
I remember being in a Walmart a few days before Christmas last year to pick up an online order. There was a 45 minute wait for people picking up their layaways. I observed one lady who had about $150 in goods decide to just get a refund of what she had already paid and walk out. As they say, that’s no way to run a railroad. So yes Mr. Livingston, many people, the poor people, do use layaways—and they don’t deserve to be treated like that.
Layaway is an appropriate and effective way to demonstrate to customers, “We feel your financial pain.” All retailers should add a layaway option to their payment system.
Layaway is important to Walmart’s demographic. A good percentage of these consumers live paycheck to paycheck. Walmart is attempting to take all the incremental sales from Kmart and Toys “R” Us, not to mention the holiday TV market from other consumer electronics retailers. I’ve seen the layaway operations first hand. As for inventory, is does get quite sloppy in many stores and does affect the non-layaway supply of some key items.
For those retailers who have not ventured into layaway sales; as long as their holiday sales meet or exceed their own expectations, and their forecasts are accurate, they’re not expected to steal that demographic from Walmart and the inventory concerns that go along with it.
I think a lot of customers are excited about layaway and the option of paying over time for purchases for the holidays. Walmart is also offering special incentives for Facebook fans by giving them extra layaway days. I read about it on 8th and Walton.
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Layaway isn’t relevant for every retailer, but it’s apparent from the Walmart sales trend that this is a key tool heading into the 4th quarter. Whether their problems are entirely macroeconomic—higher payroll taxes straining their customers’ budgets, and so forth—is a matter for debate, but it’s hard to argue with the importance of this program for Walmart.
I have never used layaway and I’ve never known anyone who has since 1980. We have become a same-day-delivery society and when when we want something, we want it now. I think for most people, if they don’t have the funds now they just put in on their credit card. If retailers do add layaway, it’s more for the press release just to get their name in the paper.
However, I think most retailers don’t want to bother with it. I worked for F.W. Woolworth years ago and the number of layaway customers was minimal. Often the customers never returned to pick up the product.
The FDIC Unbanked/Underbanked Survey released in September 2012 states that 1 in 12 households (approximately 17 million adults) and 20.1 percent of US households (51 million adults). This is certainly a sizable market of adults who likely find layaway a convenience at a minimum and quite possibly a necessity to make larger purchases. My expectation is that these individuals also make up a reasonable portion of Walmart’s customer base.
It might not be for the Saks crowd, but I would expect that retailers who target these customers will continue to expand their layaway offers.
Layaway is not important to every consumer. Nor is it something every retailer needs to have as a service. Walmart, and other large box retailers like them are businesses in which layaways could be an additional profit center.
I remember being in a Walmart a few days before Christmas last year to pick up an online order. There was a 45 minute wait for people picking up their layaways. I observed one lady who had about $150 in goods decide to just get a refund of what she had already paid and walk out. As they say, that’s no way to run a railroad. So yes Mr. Livingston, many people, the poor people, do use layaways—and they don’t deserve to be treated like that.
Layaway is an appropriate and effective way to demonstrate to customers, “We feel your financial pain.” All retailers should add a layaway option to their payment system.
Layaway is important to Walmart’s demographic. A good percentage of these consumers live paycheck to paycheck. Walmart is attempting to take all the incremental sales from Kmart and Toys “R” Us, not to mention the holiday TV market from other consumer electronics retailers. I’ve seen the layaway operations first hand. As for inventory, is does get quite sloppy in many stores and does affect the non-layaway supply of some key items.
For those retailers who have not ventured into layaway sales; as long as their holiday sales meet or exceed their own expectations, and their forecasts are accurate, they’re not expected to steal that demographic from Walmart and the inventory concerns that go along with it.
I think a lot of customers are excited about layaway and the option of paying over time for purchases for the holidays. Walmart is also offering special incentives for Facebook fans by giving them extra layaway days. I read about it on 8th and Walton.