business
Wal-Mart doing away with layaway
By Andrea K. Walker
Sun reporter
Originally published September 15, 2006









First it was tearooms in department stores. Then lunch counters at drugstores.




Now layaway seems to be seeing its last days as a familiar part of the shopping experience.

Wal-Mart Stores Inc. has become the latest and biggest retailer to do away with layaway, another sign that the practice that became popular during the credit crunch after World War II is slowly becoming obsolete.

The world's largest retailer said yesterday that the service, which it is ending in November, wasn't widely used and that it was becoming too costly to run. Wal-Mart will stop accepting layaway items Nov. 19, and customers will have to pick them up by mid- December. The company has offered its layaway service since the opening of Sam Walton's first Wal-Mart store in 1962.

"The availability of the credit card was probably the first nail in the coffin, and that's been going on for 15 years," said George Whalin, CEO of Retail Management Consultants in California. "Almost anyone can get a credit card these days.

"We've also become much more of an instant gratification society. If you can figure out how to pay for it right away, you're going to want it now."

Layaway lets shoppers pay for merchandise over time by putting down a deposit and paying a small fee. Most retailers have found the practice tedious and costly. It requires extra workers - Wal-Mart said its typical layaway department has three employees - and keeps merchandise off the sales floor. Items that aren't picked up often have to be sold at a discount.

Big retailers prefer that customers use store-brand credit cards because they make more money off the interest, retail experts said. Retailers have also replaced layaway programs with zero- percent financing programs, in which customers don't have to pay interest on larger purchases if they pay the bill by a specified time.

"Layaways have always been a pain for retailers," said Long Beach, Calif.-based consultant Bob Phibbs, who operates as the Retail Doctor. "Often it can be your best merchandise taken off the shelves and probably 50 percent of the time the customer changes their mind or never returns."

Kmart still offers layaway, and a spokeswoman said yesterday that the company has no plans to phase it out. Others offering it include Fashion Bug, Marshalls and some furniture stores. Sears has layaway on some items.

But Circuit City phased out its program two years ago because shoppers weren't using it. Value City Department Stores also recently stopped its program.

"It's been a long time since layaway has represented a significant portion of anyone's sales," Whalin said.

The move away from layaway also reflects changes in consumer shopping habits. Most would rather use credit cards where they can make their purchases right away rather than have to wait to pay them off on layaway, even if it's at the expense of accumulating debt later.

Shoppers are also buying closer to when they need merchandise. Moms who once put school clothes on layaway during the summer are instead shopping months after school begins.

"Merchandise is turning quicker," said Cheryl Bridges, director of the Center for Retailing Studies at Texas A&M University. "As new fashions come in, customers may decide what I wanted three months ago, I don't want now. It's a completely different sense of shopping. Everything is working at warp speed now."

Some retailers say there is still a market for those who use layaway, including low-income people or those who don't have credit cards. Yesterday, labor groups criticized Wal-Mart for taking a step that could hurt many of its working-class shoppers. The company said it is working to offer customers new payment options and already has zero-interest offers for six and 12 months for current Wal-Mart cardholders.

Some stores offer layaway on big-ticket items. For instance, Sears offers layaway on jewelry. It has promotions throughout the year on items such as refrigerators and televisions - and one now on snowboards - on which it offers a layaway option, a spokeswoman said.

Smaller mom-and-pop operations are also more likely to offer layaway options.

"There will always be some little, local retailer that has a store in a moderate-income community that will have people who want to take advantage of layaway," Whalin said. "I don't think it will ever completely go away."

Women's apparel retailers Fashion Bug and Catherines offer layaway services. Shoppers pay a $5 fee and a small deposit, and must pay off the balance in 30 days.

"It's a service to shoppers," said Gayle M. Coolick, director of investor relations at Charming Shoppes Inc., which owns both retailers. "If you know about our customer she is looking for value. If this is a way to help her shop we will continue to offer it."

Kmart said it has no plans to end its layaway program anytime soon. Under its layaway policy, shoppers pay a $5 fee and 10 percent of the purchase price or $10, whichever is greater. They have eight weeks to pay off the balance.

Customers use the service for reasons other than financial, a Kmart spokeswoman said. They might want to buy a gift that they don't want to take home for someone to find. Parents might use it as a way to store Christmas gifts for their children.

"It's something that our customers use, and we feel it's important to provide," said Kim Freely, a spokeswoman for Sears Holdings Corp., which owns Kmart and Sears.



andrea.walker@baltsun.com

Well, if you can't afford it, don't buy it!

UCantHavaDaMango said:

there a lot of people who needed this service. my sister makes decent money, but with three kids, it's not always prudent to spend $600 on clothes at one time. hell, i've used layaway from time to time. sometimes you see something you really need but don't have the funds right there. i think this might hurt their business a little bit, since people who can buy everything outright don't shop at walmart anyway

Fury said:

Yes I agree. It does have it's purpose, like with example you gave. But it's another thing when someone puts a 42" plasma TV on layaway, then never picks it up. I think it would be a better idea to limit layaway to certain items, rather than get rid of it all together. After reading the article, it sounds like it has been abused by people trying to live outside their means.

LayAway, never made much sense to me.

If I wanted something enough I would just save my money until I had enough to buy it outright.

If someone can't save money for an item, maybe they don't want it or can't afford it.

MickG said:

isn't that what layaway is kinda? you kinda claim stake to it to keep somebody else from buying it, then you buy it.

Where will I get my clothes now?

jerseykrs said:

K-mart

DUH !

Mach said:

MickG said:

Right on MickG! If you want a special big ticket item, save your money first!

UCantHavaDaMango said:

Well , you know by staying with my plan, adventually you come up with some tasty credit cards then you can get the big ticketted items.

I see what you guys are saying (it's just as good to save your money - usually). Layaway is great for parents who are doing back to school shopping and stuff though - they can hold the exact items they want and make payments. I think maybe what WalMart should've done is removed the layaway services in some stores for a temporary amount of time to see if they lost/gained money or whatever. I think they might have been able to tell. But layaway is - soon to be was - really useful for people with children or who want to hold an exact item that they don't know how long it will be in stock.

jerseykrs said:

Target is better.