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Layaway's new life</font size></center>
The Clarion Ledger
LaRaye Brown
laraye.brown@clarionledger.com
November 19, 2008
With the economy continuing to slow and layoffs fueling rising unemployment, storing purchases with a retailer while paying for them over time is again putting a glint in customers' eyes.
Once seen as a nostalgic relic, the layaway option is earning new supporters.
"I've never used layaway until now, with the economy going bad and money being as tight as it is," said Robin Butler, a 24-year-old Braxton resident in the process of moving to Florence. She put a few household items on layaway at Roses in Pearl on Tuesday.
A recession and the holiday season shaping up the be the worst in years, Sears on Sunday reinstated the layaway program its sister store, KMart, never ended.
"It just makes sense," Carlsbad, Ca.-based retail consultant George Whalin said. "There are people who just don't have the economic capability to buy things on credit, and layaway is their only option."
Cheryl Harris is one consumer who prefers layaway to using credit cards.
"I'm glad they brought (the layaway) back," said Harris, a 46-year-old Jackson resident, who put up a layaway Sunday and by Tuesday was on her third trip to the store. "If I don't have the extra cash, then I can layaway it."
Stores such as Roses, Fred's and TJ Maxx long have offered the purchase option to customers.
"In the economic environment that we're in, it's hard for families to get by," said Sam Watts, manager of Roses, a discount retailer in Pearl where year-to-date sales are up 4 percent over last year. Use of the layaway program has increased by 8 percent over 2007.
"Our traffic has increased because we are one of the few who offer layaway, and that's part of the reason for our increase," Watts said.
The layaway option may garner increasing support from consumers, many of whom aren't buying as much as they once did. October consumer spending slipped 0.5 percentage points from the previous month, the National Retail Federation reported. Retail consulting firm TNS Retail Forward predicted this season's holiday sales will increase 1.5 percent over the previous year.
"When everybody is competing on price, how do you stand out?" asked Scott Krugman, spokesman for the National Retail Federation. "You stand out by providing a service. If you're a retailer that has a layaway program, that clearly puts you at a competitive advantage."
Layaways provide a less expensive option compared to credit cards that carry interest charges. For a small fee, layaway programs allow customers to pay a percentage on their purchase, usually about 20 percent, and store it with the retailer until the balance is paid, typically within 30 to 60 days. Stores may charge additional fees if layaways are canceled. When credit cards became more easily available, an increasing number of people opted for the instant gratification of charging purchases and taking them home the same day.
The declining use of layaway and the expense to provide the service led stores to nix the policies. Retail giant Wal-Mart created a stir in 2006 when it announced plans to discontinue its program.
The program remains popular for some retailers.
At Roses, holiday sales make up about 40 percent of all layaway items, Watts said. Customers begin Christmas layaway shopping in September, shortly after retrieving their back-to-school layaway orders, the second biggest layaway period, which racks up about 20 percent of the total use of the program.
At Sears' Metrocenter location, news of a reinstated layaway option has prompted phone calls and questions from in-store shoppers, many of whom are putting things on layaway, general manager Henry Bingham said.
"We've had a tremendous response, not just in our store but throughout our company," Bingham said. "We had people on the first day actually showing up to utilize that payment option."
Toys and other holiday gifts have been popular layaway items.
Sears will discontinue its layaway program after the holiday season. And Whalin said consumer shouldn't expect the option to be long-running in other places that may have chosen to allow it this holiday season.
"My guess is that when the times get back to normal, (layaway) will go away again," Whalin said.
http://www.clarionledger.com/article/20081119/BIZ/811190349/1005
