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Layaway is back

Layaway is back

If you haven’t heard of layaway, it’s a service offered by some stores that lets you buy things over time without going into debt for them.

Basically you choose the things you want to buy and the store sets them aside for you. Then you go in to the stores at regular intervals to make payments on the items, and pick them up once they are fully paid off. Usually you sign a contract regarding this that includes the time frame & schedule by which things must be paid off.

Layaway had pretty much fallen out of fashion, probably due to a combination of stores cutting overhead (it takes time to track those layaway purchase) and credit cards becoming mostly-socially acceptable.

But now layaway is back. A Business Week article called Retail: The Great Holiday Blowout Sale says, “Kmart (SHLD) has long had a layaway option that allows customers to leave items behind the counter while paying for them over time in installments. But this season the big-box retailer is featuring the service prominently in ads, in the hopes that layaway—also offered at a handful of other retailers including T.J. Maxx (TJX) and its Marshalls unit, and Burlington Coat Factory—can help rack up sales.”

I can’t help but notice that all of the stores mentioned are discount stores. Does that mean anything? Is layaway’s return a function of people having less access to credit, or just a way for businesses to increase sales any way that they can? After all, if you have items on layaway, you must go into the store regularly to make payments on them. And we all know that for most people going to a store increases the likelihood of impulse purchases.

While I think that layaway provides an easy way to essentially hide bulky gifts like bikes, I’m not so sure that it’s a good idea otherwise. After all, it still locks you in to “payments”. And there can be fees involved. Kmart, for example, charges a $5 service fee to initiate the layaway, and a $10 fee if you want to cancel. Strangely, Kmart also allows people to make their layaway payments with a credit card, which pretty much defeats the purpose.

View Comments (6)
  • It’s hard to understand why they charge a service fee to start a layaway. It’s a guaranteed sale. And who the heck would pay on their credit card?

  • I think that layaway is coming back because of the lack of credit. It makes sense. I’m glad to see it coming back. I’ve never used it personally, but I think it’s a step in the right direction for our society. A little delayed gratification could do us some good.

  • Do you think this is a smart service for stores to offer during these economic downturns? It must have heart the bottom line in the past which is why the system was removed.

    Craig

  • Emily, who knows — I don’t see why anyone would pay on their credit card either.

    Ashley, you could be right.

    Craig, I bet it didn’t hurt the bottom line in the sense of it costing them money, but more in the sense of them not making as large a profits as they could without the administrative aspects. So some profit = better than none.

  • I seriously don’t understand this program. I mean – you lock yourself into this “plan” but don’t get the product until you fully pay for it. Why not: make weekly contributions to your savings account, and then when you have enough money decide whether you still want to buy the product or something else?

    What is the actual benefit to consumers here?

    The only one I can possibly think of is if the item is on short supply or else on a massive sales (would lay-away still work in that case?)

  • Shadox, the benefit is they can capture a sale price, or ensure that the store won’t run out of the item before they’ve saved enough. I’ve never used it, but it was quite common in the working class community where I grew up. For many poorer people, without access to credit, without savings, this is the only way they can take advantage of time-limited opportunities.

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