Layaway Goes Away at Wal-Mart

Discussion
Sep 15, 2006

By George Anderson


Oh, how things can change in 10 months.


A RetailWire poll in November 2005 asked respondents if layaway programs provided a competitive advantage for stores that offered them versus those that did not. Nearly three out of four replied “yes,” it did.


In the article preceding the poll, Wal-Mart was listed among those that offered layaway plans to bring in shoppers who do not have the cash to make an immediate purchase, may not have access to a credit card or perhaps, even wiser, chose not to use it. One store manager even said he had to add staff because of the increased demand for the service.


Fast-forward to yesterday and (surprise) Wal-Mart announced it would no longer offer layaway after this year due to a lack of demand for the service.


“Demand for layaway service has declined steadily as consumers turn to current options including online shopping, shopping cards and no-cost credit alternatives that were not available when the company was started,” said Pat Curran, executive vice president of Wal-Mart store operations.


Wal-Mart has offered layaway since Sam Walton founded the company in 1962.


Patricia Edwards, portfolio manager and retail analyst at Wentworth, Hauser & Violich, told The Associated Press, “This is another recognition that Wal-Mart is no longer a little Ozarks company but instead is the nation’s largest private employer and the world’s largest retailer.”


Ms. Edwards was not concerned that ending layaway will hurt Wal-Mart’s business, especially during the Christmas holiday rush. Wal-Mart’s low-income shoppers will still look to buy where the prices are lowest and that, in most cases, will lead them back to the retailer’s stores.


Wal-Mart’s shoppers, said Ms. Edwards, have an average household income of around $30,000 to $35,000 a year.


A spokesperson for Wal-Mart, Linda Blakley, was not sure how many employees would be affected by closing the layaway business. She estimated the average store had three people working in layaway. The company is encouraging those workers to look for other positions within its stores.


Kmart was quick to respond to Wal-Mart’s announcement it was doing away with its layaway program by reassuring shoppers it was sticking with its own.


Don Germano, senior vice president, Kmart retail, said in a company press release: “Kmart has offered various layaway services for nearly 40 years. We are proud to offer a wide variety of products to customers with very diverse needs. With the holidays approaching, Kmart wants shoppers to know that we think it is especially important that this service be available. Layaway service is a way for gift-givers to keep presents away from prying eyes, and provides customers with this convenient option.”


Target does not offer a layaway service.


Discussion Questions: What do you see as the value of layaway programs? Does the fact that Wal-Mart will be dropping its layaway program and Target does
not have one provide Kmart with a competitive advantage leading up to this and future Christmas holiday selling seasons?


Wal-Mart said customers will have until November 19 to place items in layaway for this Christmas season. Merchandise must be picked up by December 8.


The company is seeking to move customers to other payment options, notably its Wal-Mart credit card. Customers applying for the card at the checkout will
receive $20 cash back if they purchased at least $100 on the shopping trip.

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12 Comments on "Layaway Goes Away at Wal-Mart"


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betsy welty
Guest
betsy welty
14 years 9 months ago
I think taking away the layaway plan at Wal-Mart needs to be thought out a little more! I am not sure where they come up with the average household income being $30 to 35 thousand a year. It is not average in every city. That’s the same with saying the average wage for a Wal-Mart associate is $10 dollars per hour. This is not the case in all areas. Doing away with the layaway dept. will hurt Wal-Mart by forcing the low income families to go where they can get the layaway plan even if they have to pay extra and drive to the next town. The idea of making people go to credit cards is a little out of range, also. With some of the incomes or no credit or bad credit there is no way for anyone to get credit. As far as the gift card, you have to have the cash to put on it. This is not helping the low income families that Wal-Mart claimed to do at the very beginning.… Read more »
Mark Lilien
Guest
14 years 9 months ago

Undocumented people have trouble getting credit cards. There are millions of undocumented people who shop at Wal-Mart and millions more documented people who like layaways, too. Wal-Mart, like most retailers, has to fight for every tiny part of a percent to get to a comfortable comp sales increase of 3%. Offering extra service does create loyalty and taking services away away hurts sales.

Furthermore, Kmart isn’t the only retailer left in America that still takes layaways. The Wal-Mart story and the Kmart press release omit this crucial fact: the layaway sales volume. If it really took 10,000 people to administer the Wal-Mart layaways, the layaway sales volume would be greater than many national retail chains’ entire (nonlayaway) sales volume. Assume only half that volume is lost. It’s still a huge number.

Patricia Harris
Guest
Patricia Harris
14 years 9 months ago
What I have noticed from being a Wal-Mart vendor for years is that Wal-Mart tests and retests their decisions before they actually go through with them. The layaway customers at my local Wal-Marts – I have 3 supercenters within 4 miles of my home – all seem to be low income. The only push I have seen for a branded Wal-Mart credit card is at their gas station which offers a $0.03 reduction per gallon when used. Other than that, I never hear about it at checkout or any other time during my trip. What I do see is all the ads for the local bank in the store and, according to their signs, they would offer credit to the dead so there’s no problem there. Offering gift cards would be an excellent solution for the cash strapped consumer who was used to layaway but didn’t want a credit card. They can just as easily buy a $10 gift card each week as they can pay down a layaway. Wal-Mart is not one for offering… Read more »
david scanlan
Guest
david scanlan
14 years 9 months ago

A. You can be sure that the elimination of layaway was very well thought out, with consideration given to lost sales, the cost of continuing the service and more.

B. Kmart’s layaway, I believe (I haven’t checked in a while) has a fee attached to it, so customers are in for a shock when they see they need to “pay to lay-a-way”.

C. My observations with lay-a-way at Wal-Mart has shown that most of the users are using it as for storage of Christmas presents or other seasonal items, a hedge against future markdowns, a bet on the weather (put an AC on in May, just in case you need it in July and, if you don’t, simply cancel for a full refund) and most of those have credit cards.

D. Will some core/loyal customers be negatively impacted? Sure. Will Wal-Mart figure out a way to accommodate those customers and serve their needs? Absolutely.

David Livingston
Guest
14 years 9 months ago

If Wal-Mart says this is a waste of time, then I think they know what they are talking about.

Gene Hoffman
Guest
Gene Hoffman
14 years 9 months ago

One can assume that all of Wal-Mart’s current farewells such as layaways and any other programs it will abandon in the future will occur suddenly and offer only crumbs to competitors.

Kathy Vaughn
Guest
Kathy Vaughn
14 years 9 months ago

As a faithful Wal-Mart shopper whose income exceeds $85,000, I may not be their “typical” customer. Yet, I have used their layaway at for Christmas and birthdays for years (and yes, I HAVE credit cards) to keep presents away from prying eyes. I was happy to learn Kmart will continue layaways. Not being a frequent Kmart customer, I had no idea they even offered layaways. But now, unfortunately, Wal-Mart will lose a majority of the $2000+ I spend there annually on presents as I’ll go to Kmart instead. However, for the day-to-day shopping, I’ll still choose Wal-Mart over Kmart for their better assortment and sharper pricing.

Barry Wise
Guest
Barry Wise
14 years 9 months ago

Wal-Mart in dropping their layaway program appears to have forgotten their core customer. They also apparently haven’t considered the impact of their decisions on millions of Americans that live paycheck to paycheck and do not qualify for a credit card. This decision may not result in a large drop in sales, but what it does is remind some of its base of shoppers that it’s not their Wal-Mart anymore. And that makes you wonder how much loyalty they’d have to Wal-Mart if another competitor showed up.

Camille P. Schuster, Ph.D.
Guest
14 years 9 months ago

Wal-Mart is making a number of interesting shifts and experiments. If analysis of the data determines that the people using layaway are not part of the loyal, profitable Wal-Mart consumers, then eliminating the service will not hurt their overall business.

However, this in combination with the opening of high-end discount stores indicates some movement away from their traditional target market and toward a different demographic. The reason for stores offering different versions of their retail outlets is because they are appealing to different groups of loyal consumers. If Wal-Mart is shifting its attention to a different target market rather than offering different versions of the store then the overall strategy of Wal-Mart is changing.

Being successful with a new target market while continuing to be successful with the current target market is not a slam dunk approach for success.

George Anderson
Guest
George Anderson
14 years 9 months ago

With its recent proclamation that it would set stores to reach specific demographic targets, I’m a little surprised Wal-Mart isn’t offering the service in locations where larger numbers of customers use layaways. Guess that would be a little too individually focused for Wal-Mart to handle profitably.

Kudos to Kmart for getting out a press release that it was continuing layaway service on the same day Wal-Mart said it was dropping its program. Next, Kmart should promote the layaway feature on in-store signage as well as ads for stores that serve lower-income shoppers. The business Kmart gets may be Wal-Mart’s crumbs but at least it’s getting something. That’s better than it has been doing up till now.

Ryan Mathews
Guest
14 years 9 months ago

Layaways are a big draw for lower income or cash constrained customers. Will this give Kmart an edge? Not in this universe.

Curtis Smith
Guest
Curtis Smith
14 years 7 months ago

I personally believe that this may be a good thing for Kmart. They made the right decision, posting a press release reassuring customers it will continue its layaway program.

Kmart in recent weeks has had several “Layaway for $5” promotions in its stores and in its weekly ads, spurring more business at my local Kmart stores (I have noticed a sharp difference in footsteps in the stores).

Of course, this whole thing isn’t neccessarily all about a Layaway program either. By coming out and saying they will continue the program, Kmart, is in effect, telling the world that it is committed to its customers, that the retailer knows how important this feature is in their lives, and the impression this leaves is that Kmart cares more for you than Wal-Mart.

Even if you don’t use layaway, it makes one feel that they care more about you and your business than WM, In my opinion.

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