Layaway Drives Early Sales of Christmas Toys

Talk about your unintended consequences.

Retail stores, which have been the occasional scene of adults slugging it out (literally) over a given year’s hot toy, may find it more peaceful in the aisles this year as many of the items in greatest demand have sold out well before Black Friday comes around.

The Wall Street Journal reported last week that retailers offering earlier and less expensive layaway programs have seen a run on items that are expected to be hot sellers for the holidays. Consumers who may have been locked out in previous years as they waited to save enough money are putting what amounts to a reserve on them now, weeks before Halloween.

A number of retailers have dropped fees for layaway programs, making them more attractive than in the past. Others, such as H-E-B, are offering layaway for the first time.

Walmart, which dropped its layaway program in 2006 only to restart it again last year, saw nearly 145,000 layaway accounts opened the first day the program went live last month, according to the Journal piece. "Since then, we’ve seen continued interest in layaway, way above our expectations," a Walmart spokesperson told the paper.

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Discussion Questions

Are you surprised by the strong demand for layaway programs? What is your reaction to the news that top toys are selling out so early as consumers put them on layaway?

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Frank Riso
Frank Riso
11 years ago

I am not surprised at all at the strong use of layaway programs. I guess we should see banks offering Christmas Clubs again or are they to be holiday clubs? No, Christmas Clubs. You may be too young to remember, but banks would offer a special account to save a small amount each week and then you would have money to spend on gifts come early December. I think credit cards took its place.

I do think that when the toys are sold out it provides a great opportunity for the manufacturers to get a second and third cycle in before the holidays and that is always good for them, the retailers, and for the children.

Bill Emerson
Bill Emerson
11 years ago

This is a smart move. In addition to booking revenue early, it helps in distributing product to the stores and avoiding out-of-stocks in some stores with other stores taking post-season markdowns.

Max Goldberg
Max Goldberg
11 years ago

In light of the economy, I am not surprised to see strong demand for layaway programs. The reduced fee structures, coupled with a desire to have the hot toys make layaway attractive to consumers. Hot toys are going to sell out whether or not they are on layaway. By selling them early and allowing consumers to pay later, retailers are getting consumers into their stores, and into the holiday shopping spirit, months early. Seems like a win-win proposition.

Gene Detroyer
Gene Detroyer
11 years ago

No surprises here, especially in regard to the hottest toys. Every year many kids are disappointed and many parents go crazy because the hot toy is sold out. It only makes sense that good economy or not parents would start “reserving” those key presents.

We have taught consumers that we will run out of the best toys; now they have figured out how to be sure it won’t happen.

Diana McHenry
Diana McHenry
11 years ago

Great idea! Consumers get peace-of-mind on hot items and pay over time. Retailers pull revenues in early and still have room for more sales. This retro idea is why retail is fun — outmaneuvering on the field. Amazon does not offer layaway.

Gene Hoffman
Gene Hoffman
11 years ago

I’m not surprised for the current strong demand for layaway programs. Times are economically tough, millions of people are not working and consumer money is tight. You can select what you want in advance, have it reserved for a down payment, be relieved of the anxiety of possibly not getting the toys your kids hope for or “demand” at the holidays, and the retailer finances most of the program.

Layaway is a program well-suited to today. But when “happy days are here again” where will layaways be?

Roger Saunders
Roger Saunders
11 years ago

No surprise here. RetailWire asked a similar question of bloggers on September 10, trying to understand what level of risk was involved in layaway strategies. At that time, 50% said there was limited to nil risk.

Layaway is a promotional tool. Promotional tools go an in and out of style — that doesn’t make them necessarily bad. McDonald’s continues to make use of a Monopoly promotion after 20+ years.

What is more idiosyncratic to gift-giving at Christmas than Christmas toys? A Holiday expenditure level facing a financially constrained consumer is going to find a way to buy that Christmas joy — a toy for a child. Layaway was a smart move on the part of Walmart and other retailers that properly spotted the reality of a consumer who was facing a weak economy, dismal job market, and decreased earnings over the past four years.

Ed Rosenbaum
Ed Rosenbaum
11 years ago

This is no surprise. I am pleased to see the market has now opened enough for those in a cash or credit crunch to now be able to find the means over time to satisfy their holiday shopping needs.

Ralph Jacobson
Ralph Jacobson
11 years ago

Not surprised at the strong interest in layaway programs in specific markets that have yet to recover from the recession. This simply highlights the need to cater to consumers differently across regions and offer services that create points of differentiation where price is the only typical differentiator.

Larry Burns
Larry Burns
11 years ago

Actually, once I think about it the surprise is minimal. Given that well more than a third of US households “run out of cash” before month-end, layaway makes incredible sense. To pay in increments without running up additional debt on plastic holds a great appeal. In particular for the very large segment of the population that lives in a cash economy, this is a service that will be very appreciated by many in need.

To know one can “get” even a hot toy set aside is an additional little bonus. Now the onus is on the retailer and manufacturer supply chain to insure all these pre-orders are filled properly. Imagine the backlash and uproar (both real people and media story chasers) that could occur when a sobbing father is explaining how his son no longer believes in Santa Claus because … well, unfortunately this kind of story would be just perfect holiday fodder for the media machine. So take care, even in the best of situations issues may arise so have your PR and social media machines fine tuned “just in case.” I can not recall a situation over the last few seasons that reached my ears, but living in this real, ultra connected world, a message of caution may be wise to heed.