Layaway Plans

Layaway may sound like an old-school concept, especially in today’s “buy now, pay later” society. But the idea of setting aside products to pay off gradually is making a comeback, and is being praised as a way to regain control of family finances and make sure holiday giving doesn’t fall victim to the economic downturn.

Most people will continue to use credit cards, or, if they have it, pay cash for holiday purchases and other things they need or want. However, for people who can’t afford to pay all at once or anyone who simply wants to avoid using credit cards or keep purchases away from curious present-seekers during the Christmas season, layaway may be the answer.

Stores such as Kmart, Burlington Coat Factory and TJ Maxx cater to this need by offering layaway, even as retail giant Walmart did away with the service years ago.

By paying incrementally, shoppers may be able to afford a higher-quality product, or obtain gifts, furniture, appliances, jewelry and more in a fiscally responsible way. It’s also a relief to finally have the item in-hand without credit card debt hanging over your head.

While some (including spokespeople for the National Retail Federation) referred to layaway as “obsolete,” just a couple of years ago, anecdotal and statistical evidence indicates growing interest in layaway as consumers and retailers struggle to adjust to a changing economy. In an Oct. 20, 2009 article in the Chicago Tribune, NRF vice president Ellen Davis said, “I’m surprised we haven’t seen more companies announce layaway at this point” and went on to praise the concept of opting for cash over credit during the holidays.

Layaway is such a hot topic lately that, in winter 2008, even the 99 Cents Only store chain has announced its own tongue-in-cheek layaway plan.

The layaway concept dates to the Great Depression, when merchants gave people a chance to obtain items they otherwise wouldn’t have been able to afford. It was a win-win, as in most cases the stores wouldn’t have been able to sell to that customer without it. (As recently as the 1980s, some experts observe, only upper-income people had credit cards.) The U.S. Commerce Department’s report that retail sales were down by more than 1 percent in 2008, so layaway may be a way for retailers to reach a market that otherwise would not have shopped at their stores.

Sears Holding Company, which also owns Kmart, attributes its layaway program for contributing “significantly” to its holiday sales in 2008. In 2009, Sears and Kmart ramped up the program by offering online layaway and a “Christmas Club.”