Layaway: Stores use old tactic to spur sales

Retailers that still have layaway departments are polishing off the countertops.

The economic crisis has breathed new life into the layaway plan, a time-tested American tradition that had fallen into disuse.

Layaway plans, in which a store sets an item aside until a customer finishes paying for it, have languished in recent decades as consumers opted for the instant gratification of paying with plastic.

But the quaint notion of saving up to pay for a product before taking it home appears to be making a comeback among credit-challenged consumers, prompting Sears last week to announce that it is joining the handful of retailers that still offer the service.

Kmart, Burlington Coat Factory and select TJX stores - including Marshall’s, TJ Maxx and AJ Wright - are among the major retailers that still have layaway programs, according to the National Retail Federation (NRF).

Sears stores began offering layaway on Monday, citing the success of the program at sister retailer Kmart.

Where it is offered, layaway is a payment option for customers who want to pay for purchases over time without a credit card.

Layaway also allows shoppers who don’t want the hassle of hiding gift bags to keep their purchases away from prying eyes.

With experts projecting dismal holiday sales and retailers managing their inventories tightly to avoid getting stuck with leftover merchandise, layaway is also an option for shoppers who can’t afford an item right now and are worried the store might run out of it.

“You don’t have time once you see a product that you really want to wait until you have the money,” said Cynthia Cohen, president of Miami retail strategy firm Strategic Mindshare. “If there’s a dress your little girl really wants, and you see that sparkle in her eyes, if you don’t have the credit, that dress isn’t going to be there when you have the money.”

Retailers not only get to make a sale, Miss Cohen said, they also get more traffic each time customers return to the store to make a payment.

Kathy Grannis, spokeswoman for the NRF, said it is smart for retailers who still have layaway to promote the service in the current economic climate.

“I think of all the holiday seasons we’ve seen recently … retailers definitely stand to benefit if they still have it,” she said.

Kmart has been pushing its layaway program heavily this season. The retailer began airing ads in late October promoting layaway shopping.

Kmart stores have had layaway for at least the past 40 years, said Tom Aiello, vice president of Sears Holdings, parent company of Kmart. The company has no intention of discontinuing the program, a decision made by other discount department stores.

Story Continues →