Wal-Mart doing away with layaway

September 15, 2006|By Andrea K. Walker | Andrea K. Walker,Sun reporter

First it was tearooms in department stores. Then lunch counters at drugstores.

Now layaway seems to be seeing its last days as a familiar part of the shopping experience.

Wal-Mart Stores Inc. has become the latest and biggest retailer to do away with layaway, another sign that the practice that became popular during the credit crunch after World War II is slowly becoming obsolete.

The world's largest retailer said yesterday that the service, which it is ending in November, wasn't widely used and that it was becoming too costly to run. Wal-Mart will stop accepting layaway items Nov. 19, and customers will have to pick them up by mid- December. The company has offered its layaway service since the opening of Sam Walton's first Wal-Mart store in 1962.

"The availability of the credit card was probably the first nail in the coffin, and that's been going on for 15 years," said George Whalin, CEO of Retail Management Consultants in California. "Almost anyone can get a credit card these days.

"We've also become much more of an instant gratification society. If you can figure out how to pay for it right away, you're going to want it now."

Layaway lets shoppers pay for merchandise over time by putting down a deposit and paying a small fee. Most retailers have found the practice tedious and costly. It requires extra workers - Wal-Mart said its typical layaway department has three employees - and keeps merchandise off the sales floor. Items that aren't picked up often have to be sold at a discount.

Big retailers prefer that customers use store-brand credit cards because they make more money off the interest, retail experts said. Retailers have also replaced layaway programs with zero- percent financing programs, in which customers don't have to pay interest on larger purchases if they pay the bill by a specified time.

"Layaways have always been a pain for retailers," said Long Beach, Calif.-based consultant Bob Phibbs, who operates as the Retail Doctor. "Often it can be your best merchandise taken off the shelves and probably 50 percent of the time the customer changes their mind or never returns."

Kmart still offers layaway, and a spokeswoman said yesterday that the company has no plans to phase it out. Others offering it include Fashion Bug, Marshalls and some furniture stores. Sears has layaway on some items.

But Circuit City phased out its program two years ago because shoppers weren't using it. Value City Department Stores also recently stopped its program.

"It's been a long time since layaway has represented a significant portion of anyone's sales," Whalin said.

The move away from layaway also reflects changes in consumer shopping habits. Most would rather use credit cards where they can make their purchases right away rather than have to wait to pay them off on layaway, even if it's at the expense of accumulating debt later.

Shoppers are also buying closer to when they need merchandise. Moms who once put school clothes on layaway during the summer are instead shopping months after school begins.

"Merchandise is turning quicker," said Cheryl Bridges, director of the Center for Retailing Studies at Texas A&M University. "As new fashions come in, customers may decide what I wanted three months ago, I don't want now. It's a completely different sense of shopping. Everything is working at warp speed now."

Some retailers say there is still a market for those who use layaway, including low-income people or those who don't have credit cards. Yesterday, labor groups criticized Wal-Mart for taking a step that could hurt many of its working-class shoppers. The company said it is working to offer customers new payment options and already has zero-interest offers for six and 12 months for current Wal-Mart cardholders.

Some stores offer layaway on big-ticket items. For instance, Sears offers layaway on jewelry. It has promotions throughout the year on items such as refrigerators and televisions - and one now on snowboards - on which it offers a layaway option, a spokeswoman said.

Smaller mom-and-pop operations are also more likely to offer layaway options.

"There will always be some little, local retailer that has a store in a moderate-income community that will have people who want to take advantage of layaway," Whalin said. "I don't think it will ever completely go away."

Women's apparel retailers Fashion Bug and Catherines offer layaway services. Shoppers pay a $5 fee and a small deposit, and must pay off the balance in 30 days.

"It's a service to shoppers," said Gayle M. Coolick, director of investor relations at Charming Shoppes Inc., which owns both retailers. "If you know about our customer she is looking for value. If this is a way to help her shop we will continue to offer it."

Kmart said it has no plans to end its layaway program anytime soon. Under its layaway policy, shoppers pay a $5 fee and 10 percent of the purchase price or $10, whichever is greater. They have eight weeks to pay off the balance.

Customers use the service for reasons other than financial, a Kmart spokeswoman said. They might want to buy a gift that they don't want to take home for someone to find. Parents might use it as a way to store Christmas gifts for their children.

"It's something that our customers use, and we feel it's important to provide," said Kim Freely, a spokeswoman for Sears Holdings Corp., which owns Kmart and Sears.

andrea.walker@baltsun.com

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