Layaway makes a comeback in soft economy

A growing number of national retailers is discovering what some local businesses have long known: Old-fashioned layaway plans help sales in a tough economy.

In mid-October, Toys R Us became the latest high-profile retailer to embrace the nearly century-old practice when it announced a layaway plan for big-ticket items such as bikes and cribs.

Layaway is nothing new for Bowies Gold & Diamonds on east Pikes Peak Avenue. The business has offered layaway for almost all of its 45 years, said owner Cheryl Estrada.

She said she’s seen renewed interest in the program since the latest recession.

“I don’t think it’s a bad thing at all,” said Estrada. “In today’s economy, it’s the way to go.  You’re not being charged interest on a card or finance charges on a loan.”

This fall, Kmart and Sears, owned by the same holding company, announced they would offer layaway for some online purchases. Kmart has offered layaway for years and now makes layaway a key feature in its Christmas advertising. Sears, which ended its layaway plan in 1989, restarted it for the holiday season last year after seeing how it was embraced by Kmart shoppers, said Sears Holding Corp. spokesman Tom Aiello.

This year, Sears has extended the plan year-round for many but not all items in its retail stores and is also offering it to online shoppers, who can have goods shipped to their homes or pick them up at a local store.
The company does not release financial results on layaway sales, but Aiello said “anecdotally, it’s been very successful.”

“Pundits last year said Americans wouldn’t accept delayed gratification,” he said, “But surprise, it was popular and that popularity continued all year.”

Kathy Grannis of the National Retail Federation said a handful of large retailers began promoting their layaway plans heavily last holiday season. She said the federation does not have statistics on layaway sales but said the renewed popularity of the marketing tool is an indication of troubled times, with retailers trying to bolster sales.

Layaway plans vary, but consumers generally pay a small fee and a percentage of the purchase up front and then pay off the remainder over a period of time. The merchandise can  be picked up or sent after the total purchase price is paid.

 “We’re in uncharted waters with this type of economy,” she said. “It’s safe to say maybe people who never used layaway before might use it this year. Seeing those credit card bill come in January or February could be a shock, especially if you’ve lost your job or had your hours cut.”

Other retailers offering layaway plans include TJ Maxx, Marshalls and Burlington Coat Factory. Home Depot and Best Buy are offering online layaway plans.

Walmart stopped offering layaway in 2006, saying it threatened its cost controls, and neither Target nor JC Penney offer payment plans.

Locally, Chuck Snow, a salesman at Colorado Music Exchange on east Pikes Peak Avenue, said the music store has been offering layaway for years but has seen an uptick in interest.

“I’ve noticed lately that a lot of people who might once have been inclined to use a credit card are using layaway,” he said. “It’s something we kind of all grew up with. It’s another tool to have get people something they want.”

Monica Weller, manager of Navajo Gallery and Gifts in Manitou Springs, said the store has offered layaway for at least four years but has been promoting it more recently.

“I have at least a dozen items on layaway right now, usually the larger  more expensive items like sculptures,” she said. “A couple recently asked jokingly if we had layaway and they seemed surprised when I said we did.”

The Tick Tock Shop, a business on Circle Drive that repairs and sells watches and clocks, has offered layaway since it opened 35 years ago, said Jessica Mattson, granddaughter of owner David Mattson.

She said most of the items customers put on layaway are more expensive. “We just do it for the convenience of customers,” she said.

ONLINE LAYAWAY

A Florida company,  eLayaway, is offering a new twist on payment plans. The company was founded in 2006 but gained traction at the end of 2008, when the economy tanked, said Sergio Pinon, founder and chief marketing officer.

The company now has more than 70,000 customers who can shop at hundreds of online and retail stores that have signed up with eLayaway, said Pinon.

Customers choose a payment plan — from three to 13 months — and the monthly payment is taken directly from their bank account. eLawaway charges a 1.9 percent transaction fee on the total purchase price.

He said the credit crisis eventually will ease, and some of those now using layaway will return to using credit cards.“Credit will eventually come back, but this recession has been like a steamroller,” he said. “It has left a lot of folks devastated credit-wise, and it will be seven to 10 yearsbefore they recover.

“This (layaway) is all they have left,” he said. “They have no other options.”