- The Washington Times - Tuesday, November 18, 2008

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.

Kmart’s layaway option allows consumers to pay off regular- and sale-price items over an eight-week period with a $5 one-time charge and a 10 percent down payment. Payments must be made every two weeks, but there is a seven-day grace period to give shoppers flexibility, Mr. Aiello said.

Kmart planned to stop offering layaway on home electronics costing more than $200 this month, he said, but that restriction is being lifted because of the popularity of the program.

“Enough customers continue to use layaway at Kmart,” Mr. Aiello said.

Kmart claims that it is the only national discount department store that still offers layaway.

Burlington Coat Factory stores have featured a layaway option since 1972, and its employees are trained in the layaway program, said Audrey Shapiro, public relations director for the New Jersey-based retailer.

“We do have the system down pat,” she said.

Burlington’s layaway program offers a 30-day policy requiring a 25 percent deposit, 25 percent within two weeks and a final payment due at pickup. There is a nonrefundable $5 service charge and a $5 cancellation fee, according to Burlington’s Web site.

Burlington has been advertising layaway in weekly advertising circulars and in its stores to make sure customers are aware of it, Ms. Shapiro said.

It is being promoted more than usual because Burlington thinks there is a need for layaway in the current economy, she said.

Layaway does present a financial downside for retailers. They risk getting stuck with leftover inventory if people change their minds about a product, despite cancellation fees that are intended to discourage the practice. Also, just as gift cards don’t go in the books as a sale until they are used, layaway sales are not official until the final payment is made, Ms. Cohen said.

Stores also need people to staff a layaway section - people who could be working elsewhere in the store.

Cost was the main reason why Wal-Mart discontinued its layaway program in all departments except jewelry.

The cost to implement a layaway program raised prices, and layaway use had dropped off by late 2006, leading the discount retailer to end its program, said Wal-Mart spokeswoman Ashley Hardie.

“We feel the best way to serve our customers during the holiday season is to keep our prices low,” she said.

For other stores, the profits of a layaway program are outweighed by the costs of staffing a layaway section and keeping valuable shelf space open for layaway items, said Ms. Grannis of the NRF.

“At the end of the day, everything takes a back seat to price,” she said.


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