For nearly 15 years, Anita Short has been buying items on layaway.
"It worked for us because it's easier to budget," she said. "You know what it's going to be, when it's due."
Layaway was once on its way out -- Walmart discontinued the service in 2006, following the lead of a number of other retailers -- but has seen a resurgence in use since the recession, with more stores emphasizing their offerings or bringing back the service.
Some shoppers, like Short, sought it out all along, while others are discovering it anew.
And retailers are saying that layaway revenue this year is better than ever. In fact, some have seen such success with layaway that they have expanded their offerings, allowing people to lay away items for a longer time frame, or make their payments online.
Between 2008 and 2009, Sears Holdings saw 3 million new layaway users between its Sears and Kmart stores, said Salima Yala, division vice president of financial services for the company.
In the 10-store Sears district that includes Chattanooga and metro Atlanta, there was a 70 percent year-to-date increase in layaway income as of early November, Cumberland Mall store general manager Danielle Groom said. But her store and another in Alpharetta did even better than the average, posting 95 percent increases over 2009.
"It's awesome for us. It's great revenue overall for the company," she said.
Yala said layaway is good for the chain because it differentiates the stores and gives shoppers who struggle with their spending options a way to take home the merchandise they want or need.
Short, who was making her last payment on a 21st birthday present for her daughter at the Mableton Kmart, said she buys on layaway because she's on a fixed income and doesn't have good enough credit to have a credit card. She saves money by buying sale items, she said, so with the layaway fee, she is still paying less than full price for an item.
Layaway fell out of favor as credit cards became more popular, said Howard Davidowitz, chairman of national retail consulting and investment banking firm Davidowitz & Associates. But in the grips of the recession, as credit limits dropped and people became more conscious of spending money they didn't have, the throwback method of paying for items piecemeal found new life.
The spread-out payment method charges an upfront fee, but shoppers do not pay additional interest on their purchases. Despite increased use, though, Davidowitz said layaway is an old idea that is inefficient in modern times. Stores have to hold on to the merchandise, he said, and if users change their minds, the retailer has to discount merchandise that it's been keeping all season.
Others see a future for layaway in a time when it doesn't look as if unbridled credit will return any time soon.
"It has its place in the orchestra of consumer purchasing," said Emanuel Weintraub, president and CEO of management consultant company Emanuel Weintraub Associates Inc. "It's a reminder that if you want it, you should be able to pay for it. It probably has good growth potential, in a minor way."
Some Best Buy stores, like the one in Snellville where Taylor Drake is the operations manager, added layaway when customers there kept asking about its availability. While Drake couldn't share exact figures, and Best Buy would not talk about how well layaway is received nationally, he did say there has been an increase in traffic, and therefore profit, from layaway customers. In addition to the Snellville store, only those in Lithonia and Macon offer layaway in the state.
A full list of Best Buy stores with the service can be found on the company's website.
TVs, computers and gaming systems were the most popular items, Drake said. And it's not just at Christmas -- customers have been using the service throughout the year.
"They couldn't have bought it any other way," Drake said. "It's the ultimate form of financing."
Often, Drake said, shoppers express relief when they realize they can still purchase items they didn't know if they would be able to get.
In addition to Kmart, Sears and some Best Buy locations, Atlanta shoppers can find layaway at Marshalls, T.J. Maxx, Burlington Coat Factory and Toys R Us.
In an e-mail, a Burlington Coat Factory representative said it has been offering the service since 1972. About 10 percent of that store's customers use layaway, and there is a slight increase both around the holidays and back-to-school time periods. It accounts for about 5 percent of annual sales, the e-mail said.
Toys R Us added layaway in 2009 and extended it in February of this year, a company spokeswoman said in an e-mail. Like other retailers, she said one of the benefits of the program is the ability to hide large items from recipients. Toys R Us has no plans to eliminate layaway.
Layaway users typically pay a service fee and a percentage of their total purchase when they pick out the item, then return to the store every week to continue making payments. Some stores charge a fee if the layaway is canceled; they return the rest of the money to shoppers who start the layaway process and don't finish it.
New changes to some stores' offerings allow layaway users to pay online instead of coming to the store, or have extended the time period for making some payments. That is the case at Sears, which -- along with Kmart -- added a 12-week layaway option this summer in addition to its normal eight-week program. That and an online payment option have aligned with greater layaway usage.
Kmart has had more online layaway users, said Bill Bonsor, manager of the Mableton store. Still, he has seen lines at the layaway counter on weekends and said more people are becoming aware of the program and its offerings.
Groom, at the Cumberland Mall Sears, said the number of people putting clothing on layaway has shrunk since 2008, while electronics and fine jewelry have seen an increase. People began using layaway earlier in the shopping season, but she still expected the number of items held at the store to double in the weeks before Thanksgiving.
At that Sears in early November, the layaway items included 11 Wiis, eight televisions and four mini laptops. There were 39 bags of apparel, 10 pendants, seven bracelets and five promise or engagement rings.
"It's all over the board," Groom said. "All kinds of customers are doing it."
Yala, at Sears Holdings, said layaway is continuing to make a comeback, and the option draws customers to the store who might not otherwise shop there. She said customers use it as a financing tool to help them plan for the long term.
"Those who are planners, this tool fits right in with the way they transact," she said. "If they have bad credit, no cash flow, layaway is a way for them to control their spending. It's not impulse shopping, this is planned shopping."
How layaway works
Different stores have different fees for their layaway services, but the basics remain largely the same. As an example, here is how layaway would work if you were shopping at Sears, which introduced the program after merging with Kmart in 2005.
Customers go shopping, then bring their purchases to a register or customer service. They also can begin the layaway process online.
At Sears, there is no minimum required purchase to put items on layaway, as long as the total is more than the down payment of $15 or 20 percent of their purchase, whichever is greater, and the $5 service fee.
Customers make four equal payments every two weeks. In addition to the eight-week layaway option, those who spend more than $400 have the option to put their items on layaway for 12 weeks. That program has higher fees (including a $10 service fee and a $30, or 20 percent, down payment) and is not available online.
Perishable items are not permitted in the program. Some retailers restrict clearance or other items.
Shoppers must make their final payment in person, so they can pick up their items.
Sears offers a 14-day grace period if a payment is missed. Shoppers are called if they miss a payment due date.
If they cannot be reached, they are sent a check for the total they have put toward their purchases, minus the service fee and a $10 cancellation fee ($20 for the 12-week option).
Customers also have the option to cancel layaway on their own, for the same cancellation fee.
No price adjustments are permitted after seven days from the start of layaway, on clearance items or on seasonal holiday merchandise.
While it’s too late to use the full eight- or 12-week layaway programs and still get your items by Christmas, the process can always be condensed, with shoppers making larger payments over a shorter time period. Many retailers, too, are offering layaway not only at the holiday season, but throughout the year.
About the Author
