Layaway Goes Away at Wal-Mart
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.
- Wal-Mart to End Layways – The Associated Press/Kiplinger Forecasts
- Kmart Continues Layaway Service – Kmart