In a time when pennies count, retailers are looking for any competitive advantage they can find. One way which is starting to make a comeback is the layaway program. By allowing customers the opportunity to put items on hold for a set number of weeks, it gives the consumer who may not be able to afford a purchase right now the opportunity to lock in their price. These programs have several different structures, some charge upfront fees at the beginning of the layaway period, and additionally some of which accrue interest charges.
This philosophy is nothing new in the retail world, but has seen a renaissance over the past few years, with many large retailers such as Sears, Kmart, and Toys ‘R Us pushing the programs. By offering layaway, retailers hope to boost early sales and beat their forecasts for the holiday season. Layaway does, however, have its downsides for companies since many have waived their service fees if consumers do not follow through with their purchase. This leaves merchandisers holding onto the extra inventory. Also with this new push to increase sales, retailers are adding many new items eligible for layaway. This move could prove to be both a positive and a negative. While on one hand it will bring in more shoppers to put things on layaway. If enough consumers do not follow through on their contracts and the stores took precious items off the sales floor, the results could prove costly.
By offering layaway financing through the stores themselves, it gives consumers who do not have, or might not want to use their credit cards. By allowing these consumers who might not have purchased the item otherwise to purchase from your company, it opens your profit potential that much more. Because it entails more planning on behalf of the merchandising crew, and all of the other aspects listed above, the decision on whether the layaway program is beneficial to each individual company is something that is up for debate.
Question: If you had a retail company, do you believe implementing a layaway program would be a good idea? What are some other benefits and consequences in addition to the ones mentioned that might come about due to a layaway program?
4 thoughts on “Shop Like It’s 1999!”
I never thought that layaway would make a comeback but, sure enough, it did. I found the first program from Walmart and I thought it could not have come at a better time, (right before the holiday season). I agree with your comment on how these programs open consumer profit potential significantly more. Yet, I don’t feel that starting these programs at a retail store would be a good idea only because it reminds one too much of the “bubble” crisis that ignited our financial downfall. More products on layaway means more obligations and more reasons for the “naughty” consumer to somehow play with the system and further corrupt a, what I feel, great program for those who cannot afford products same day. Either way, this was a great find. Thank you for your posts and links.
Instituting layaway programs for retailers such as Wal-Mart and K-Mart is a great idea for such companies. Like the above post allows for people to afford at a later date, which in recent times is a large percentage of the American economy. Such programs allows for the middle income, which have suffered greatly during the recession to purchase items for the holiday season as well as items everyday items. I think the idea is great and truly reflects the current economic situation of our country, from a management point of view it offers great possibilities for profit.
Layaway is a great opportunity for families and individuals to purchase something they have always wanted, if they can’t afford paying for the item right away. I believe this idea will be successful in select retail stores, such as the ones listed above, but it can be risky if the consumer cannot afford to pay the monthly or weekly payment for whatever reason because like the it is stated above, that will become inventory that could have been bought by someone that can pay for the item right away. Just like any idea, this one has its positive and negative sides too.
I know there are negatives to layaway, I just can’t believe it. In today’s economy many would jump at the chance to put something away now. Knowing when they can afford it during the holiday season bustling with that specific item being the hot thing or now out of season, they can grab it now worries, stress free.