Walmart Brings Back Layaway
Back in 2006 when Walmart decided to do away with its layaway program, this is what a company official had to say: "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." The company, along with others who did away with layaway, cited the high cost of maintaining a program and the relatively small returns generated.
Fast forward to today as Walmart has announced it is bringing back its layaway program for the upcoming Christmas holiday.
"We’re always looking for ways to ease budget strain for our customers, and we know this holiday season in particular brings with it additional financial pressure," said Duncan Mac Naughton, chief merchandising officer for Walmart, in a press release.
The retailer announced its plans on Facebook. According to Walmart, its shoppers are mostly interested in the program for buying consumer electronics and toys.
The chain is making layaway available on toys and electronics priced at $15 or higher. Walmart customers may take advantage of the program between Oct. 17 and Dec. 16. Shoppers can make payments at the checkout and layaway orders are processed at the Walmart.com counter in most of the chain’s stores. Layaway orders or pickups are not available on Black Friday.
"Our customers told us they want a hassle-free layaway option during the holiday season," said Mr. Mac Naughton. "With our Christmas layaway program, they can focus on what’s important to them during the Christmas season instead of stressing over mandated payments or how to tuck money away for gifts."
Discussion Questions
Discussion Question: Will reinstatement of layaway be a competitive advantage winner for Walmart or a bottom line loser for the chain?
The reinstatement of a limited layaway program at Walmart is very important to the retailer. It signals yet another return to their core customer base needs and a further turning away from the ideas fostered by the John Flemming era.
Layaway is a labor intensive, space intensive proposition but is one that serves core customer needs and gives customers a reason to shop at Walmart over their competition.
This is a limited return but if it is successful, and I believe it will absolutely be a hit, I’m guessing that Walmart will expand both the categories and the time frames in which it is offered to their customers.
Layaway was a winner (relatively speaking) for Kmart, and it should be a winner for Walmart, too. Any costs associated with the program (logistics, financing, etc.) should be more than offset by the opportunity to gain share and to reinforce Walmart’s value image at an important crossroads in its sales trend.
Walmart is scrambling to get their core customer back. Between the SKU rationalization disaster that drove their loyal customers to find their favorites elsewhere and the beating they’re taking at the hand of the dollar stores, they must leave no stone unturned.
Layaway is a useful pseudo credit tool that gives customers more flexibility to purchase, especially in the current tight credit environment. I think it’s a good move.
Well, Walmart is not the first retailer to do this. I believe Kmart re-started its layaway program in 2008 and that it has been a small success for the company.
I think it’s a good idea for Walmart and will reap some small benefits. Competitive advantage? Not so much.
Welcome to the cash economy. Not only a sensible move on Walmart’s part but one that shows social sensitivity. Instead of pushing cheap credit, they’re encouraging responsible consumption. This is contextually right for the times and for their target customers.
There are two aspects to Walmart’s announcement. The first is the actual financial benefit to the company. As several have pointed out, that may be of great value — especially given the limited categories where layaway is available. However, the larger value is the customer perception and publicity value. Customers who wanted layaway, and those that may want it now that they are aware Walmart offers it, will see this another reason to shop there. In addition, the story regarding layaway has been featured on several news shows including this morning’s HLN giving Walmart some positive news it can use.
Look, Walmart desperately needs to hold share and, in troubled times, that makes layaway a good addition to their commercial arsenal.
Besides, what’s a greater threat to the bottom line — losing margin points or losing a customer for life because they believe you broke faith with them in their moment of need?
Bravo Walmart! The customer is always number one. Walmart’s layaway proposition may also be applicable to the pre sale of movie and game releases. This is an opportunity for them to close the gap on share gainer’s such as Game Stop. What’s Ahead for Walmart? Gift registry?
I saw this in a blurb during the football game last night and I said to myself, what a great idea with perfect timing. In fact, I saw the blurb right after Obama’s jobs speech. I guess Walmart doesn’t feel that the economy is getting any better. But this raises a question, do they book layaway sales right away or only after the item is paid for? My research shows only about 30-40% of layaway purchases are actually picked up.
Walmart will see an increased sales number from this. There are too many people who need this to provide the holiday necessities for their family.
This won’t be a bottom line loser for WMT, as they have adequately protected themselves. Read the fine print, namely the $5 service fee + $10 cancellation fee clauses. They’ll be fine.
I think this is about reconnecting with their core customer. Layaway itself is a money-loser, but it provides a desired service and may get customers into the stores that may buy other things, who might have otherwise not visited.
I don’t think, however, that the return of layaway will be a long-term trend. I think that once we get into a better economy (whenever that might be) that these layaway programs will go away again.
If anyone can win at layaway, it is Walmart. And, the difference is their ability to manage their inventory. Layaway in the old days meant taking up space and cutting turns of product. Walmart can manage their program with neither downside.
The fact is that the red-headed Barbie that someone lays away does not have to be a specific red-headed Barbie, as long as the retailer has one available when its time.
I know of no other retailer that can make layaway a profit producer rather than an awkward and costly program.
Just can’t resist noting that Walmart is copying what Kmart and then Sears did in 2008. Not often we can say that and I’m sure it must have some deep meaning.
In working with Walmart during the time they got rid of the layaway program, it was a very big disappointment to customers, the stores, and to some of the buyers. Hearing that Walmart is bringing back this program is going “Back-To-Walmart” basics…focusing on the customer! They are slowly returning back to what the Walmart cheer has always stated…”Who is number one? The customer!”
I am sure the return of the Walmart layaway program will become permanent. You have to give the customer what they need not just at holiday time but all year long!
This is a great idea to assist in better managing their “difficult” electronics sales. Layaway has a great history for those who have poor credit, and for many unemployed Americans who have lost their homes this is one of the few ways that they can “save” for products without changing their cash flow all of the time. The flexibility offers relief, while the PR for Walmart is a boost as well.
Layaway, in an environment of economic uncertainty, presents consumers with a simple, easy-to-manage payment approach to purchase items without excessive use of credit. Not only does it make sense from a strategic perspective, but since Walmart customers have requested it, the company looks more customer-centric in the process.
Given that Walmart customers include a segment of credit-disadvantaged, as well as many customers who are concerned about finance, this move should demonstrate incrementality as well.