Layaway Every Day

Discussion
Apr 22, 2010
George Anderson

By George Anderson

While many retailers have done away with layaway programs, citing the high
cost of managing the programs and low comparative returns, others such as Kmart
have benefited from filling the void. Kmart’s parent company, Sears Holdings,
said it saw double-digit growth in the program between 2008 and 2009 as more
than three million went the layaway route.

According to Mark Snyder, chief marketing officer of Kmart, the company’s
research has found that 70 percent of consumers have changed their shopping
behavior as a result of the recession.

In an interview with CNBC, Mr.
Snyder said, "The recession has
taught [consumers] that they’ve got a ton of choices. They recovered their
full power as shoppers and they’re out there using it."

Many, Mr, Snyder asserted, are using layaway as they plan purchases to avoid
taking on further debt now.

"In February, she’s buying outdoor living
sets," Mr. Snyder said. "It’s
still snowing outside, but she knows in eight weeks they’re going to begin
to move outside again, [and] she wants a new patio set."

Discussion
Questions: Will the demand for layaway programs lessen as the economy rebounds?
Will layaway be a valuable differentiator for retailers moving forward?

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7 Comments on "Layaway Every Day"


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Ryan Mathews
Guest
11 years 23 days ago

It all depends on which markets they are targeting. For down marketers, layaway will be an effective tool for years to come. For up marketers, not so much.

David Livingston
Guest
11 years 23 days ago

Layaway is a thing of the past. Most people have credit cards and can just get what they want now and take it home. I’m sure Kmart has seen double digit growth in layaway sales but when you are down to nothing, double digits in anything is easy to accomplish. I don’t see the economy being much of a factor and for most retailers I don’t see much of an ROI.

I think layaway customers are few and far between and exist on the extreme financial fringe of society. Keep in mind, Kmart is doing it and they are probably the lowest sales per square foot big box retailer in the country. Is there one doing worse than them? If so, someone tell me.

Dan Desmarais
Guest
Dan Desmarais
11 years 23 days ago

Let’s hope that people have learned something from the past 18 months of financial turmoil. Layaway was always a good thing that was unfortunately overlooked by the younger generation eager to ring up their credit card bills.

We should all be teaching our children about delayed gratification, and the layaway program is a great example of sleeping on your wish for a night or two before spending the money.

George Anderson
Guest
11 years 23 days ago

“Sears has formed more than 3 million customer relationships through the program,” according to the CNBC interview with Mark Snyder. Sounds like a sizable fringe.

Paula Rosenblum
Guest
11 years 23 days ago

I think it’s a good program for a certain segment of the population.

However, it’s a pain in the neck for retailers, especially for accounting systems, so many will be hesitant to put it back in place. Layaway sales are also a great way to “game” sales contests.

In fact, I wonder if our current generation of merchandising and POS packages can even handle layaway sales–I know if I had been involved in building one, I probably wouldn’t have accommodated the transaction. You have to send the data in 2 different directions–decrement merchandising inventory (the item is not available for sale anymore) but leave financial inventory intact (the goods have not been delivered). And then there are layaway returns, which are the opposite.

The customers will really have to pull this from the retailers. Fascinating–yet another example of the customer in charge.

Doron Levy
Guest
Doron Levy
11 years 23 days ago

Layaway is another means for customers to buy stuff at your store so from an ops perspective, it’s always a good thing. Not being able to manage it effectively is an internal issue and the idea is not flawed. Kmart has proven that layaway can work. Would layaway work at Nordstrom or Saks? Probably not. I couldn’t see hefty demand for it in those types of locations. But it speaks in volumes to Kmart’s customers. And the additional revenue and customer relationships doesn’t hurt either.

Carol Spieckerman
Guest
11 years 23 days ago

I see big opportunities for layaway to become a more relevant option for consumers and retailers rather than an afterthought. Promoting big ticket, off-season (those yard sets and perhaps mowers, grills, and trampolines in the fall, for example) would allow consumers to lock in lower prices and pay items off in time for the season, and help retailers move inventory.

I also think retailers and consumers would benefit from more interactive layaway management programs. They could run much like Sam’s eValues program with in-store kiosks and online account management options that would encourage additional purchases and give customers access to account balances where and how they want to see them.

Layaway has gone the way of the dodo because retailers haven’t revisited the possibilities.

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