One side effect of the Great Recession is the return of the layaway. A layaway is a low-cost finance method for a customer to make a purchase in installments prior to buying the item. For example, a customer who is eying a $100 jacket might not have enough money to buy it at once, but under a layaway plan, she can put away $20 a week for 5 weeks until the jacket is paid in full. Usually there is also a fee associated with the program to compensate the store for putting the item on hold until the customer makes the final payment.
Wal-Mart, U.S. largest retailer, ended its 44-year layaway program in December 2006 and have no plans to reintroduce it. Several large chains are bringing back the practice, however. Sears is advertising its layaway program as “Shop Now, Pay Later”, but that isn’t quite the case. Customers do have the benefit of reserving popular items with a $15 or 20% down payment to begin the layaway, however, they would not be able to pick up the item until it has been paid in full.
Layaway has largely fallen out of favor for the past years. Instead, credit became the norm in paying for purchases. (In fact, the first time I heard of the concept of layaway was a year ago, when the beginning of the economic crisis prompted many retailers to offer the option for the first time in years). With a declining economic environment and tightening credit, companies see the benefit in offering layaway programs. K-Mart, Sears, Toys-R-Us, TJ Maax, and Marshalls are offering layaway as an option in all or most of their stores.
K-Mart offers an 8-week period for customers to make payments. In order to reach more customers, K-Mart has also introduced an online version of layaway. As Carmen Dixon of BV on Money said, “layaway is going digital”.
Toys ‘R’ Us has introduced the layaway program for the first time in 2009. Layaway is available for expensive products, or as the company calls it, “Big Gifts”. The Big Gift Layaway can be used on items such as dollhouses, indoor table games, playsets, baby gear, and battery-powered vehicles. Consumers pay a $10 fee and must put a 20% down payment to put an item on layaway.
Jackie O’Malley of Buffalo, New York, calls the layaway plan a guilty pleasure because “it simply makes you feel better when you pay off the last amount (without ever paying interest) and are able to take home your items.” Even though layaway might be considered old-fashioned, the change from credit’s “buy now, pay later” mentality is a refreshing change to many people.
Layaway was a common practice during the Great Depression, so it’s no surprise that as the country struggle with the Great Recession, layaway programs have enjoyed a resurgence in popularity.
Are you planning to use layaway this holiday season?
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