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Layaway Makes a Comeback in Sagging Economy

The holiday shopping season is almost in full swing. But this year consumers may not be spending as much on gifts as the economy continues to slide south. In an effort to help customers and secure sales, retailers are pushing an old tradition - The layaway. Some retailers are aggressively pushing their plans, and at least one which had discontinued layaways, is bringing them back.

Brandy Smith stands at the layaway counter at the West Dublin-Grandville Road Burlington Coat Factory waiting for some items she put away for the holidays. Chocolates and Hannah Montana candy litter the counter top and Smith keeps explaining to the pleading two-year-old girl at her side why candy is not good for her teeth.

Smith will pay off her off layaway balance and take home what looks mostly like children's clothes - there's some pink lace and ruffles among the stack which just might be for the candy-craving toddler.

Smith, who has four children, said layaway was the best way to pay for the holidays on her budget.

"Have you ever used layaway before? Or is this your first year? This is my first year. And what made you decide to do that this year? Just low on money and space it out," Smith said.

For those who've never used layaway or have forgotten about it, here's how it works:laid away items are usually placed in a box and set in the back of the store until they're paid for. Typically there's a small layaway fee - $5 is average - and most stores require a deposit, say 20 percent of the cost of the items. Depending on the store you may have 30 days or more to pay off the balance. And if the layaway is canceled a fee can mostly likely be expected - but usually it's not more than 10 bucks.

Stefanie Shiblaq from Plain City is in the same layaway line as Smith. Her shopping cart's pretty full with a couple of coats and some toys. A large box, holding some kind of child's game, sticks out from both sides of the cart's bottom rack.

"It's a good way to go these days especially you really don't know how much you want to spend and what the outcome's going to be in the next couple of months. With the economy? Exactly," Shabliq said. Burlington Coat Factory's Joan Ochman said the chain has offered layaway since it opened in 1972. She said it's a courtesy to its customers.

"Sometimes they may need something or they would like something and they don't have the funds available at that particular time so layaway is a great way for them to get the items that they need," Ochman said.

And holiday shopping funds are likely to be scarce this year for many Ohioans. The stock market's the worst it's been since 2003 and more than 430,000 people are out of work in the state.

Sears put away its layaway program nearly 20 years ago. But now the retail giant is offering it again. Sears division vice president Tom Aiello said a couple of reasons prompted the retailer to reintroduce the program. He said customer requests played a significant role. "They were in the stores talking to our associates, talking to our store managers about what a great solution layaway would be to help them manage their holiday shopping. At the same time one of our sister retailers, K-Mart, has layaway and consumers have really been using that pretty successfully this holiday season," Aiello said.

Frankie Mounts manages the Sears at Eastland Mall.

"It's actually been a phenomenal response. And customers are saying thank Sears for thinking of them this year and helping them have a Christmas," Mounts said.

At Sears there's a $5 layaway fee, a 20 percent down payment and the purchase must be paid in full by December 23. Should a customer cancel the layaway they get back any money put down minus a $10 cancellation fee.

Aiello said there's a misconception that layaway only appeals to the customer with a tight budget. He said that's not necessarily the case.

"What we've actually seen is a broad range of customers coming in. You've got also more affluent kind of quote smart shoppers that come in and like the idea about getting that hard to get item, getting it at a good price and not having to worry about credit card debt after the holiday season," he said.

As more and more retailers began to offer in-store credit cards layaway plans all but disappeared. Stores entice consumers by offering incentives, like 20 percent off the entire purchase, when a new account is opened. But with the economy in the tank credit card companies are tightening the reigns on who gets credit. Ann Paulins directs the School of Human and Consumer Sciences at Ohio University. She said, partly because of the credit squeeze, stores that have never offered layaway plans before may start.

"Retailers need customer business. They need it right now, they need to make sure their holiday sales are in an upward trajectory because there are likely to be fewer retailers left standing after, you know, if they don't make it in this holiday season they're in real jeopardy," Paulins said.

Paulins said in response to the uncertain economy, consumers are pulling back their spending and being cautious about using credit cards. She said while layaway helps customers, retailers also see it as a way to secure purchases.

"So really I think the motivation now is retailers want consumers to already commit their limited dollars. So if they say, hey, we're offering all kinds of ways for you to do that, one is layaway. If they get the consumer to bite and the items laid away then they've got a commitment from the consumer to come back and make those payments," Paulins said.

There's always the risk a customer will cancel their layaway. But as other customers go back to the store to make payments, Paulins said the chance of additional purchases significantly increases. So retailers, she said, are not bothered too much by cancellations.

While Paulins said retailers' futures hang in the balance of the outcome of the holiday season, they can rest assured that some people, despite the unnerving economy, will continue to use credit.

"You know, I think that there will continue to be the pressures to put finances on credit because, you know, just the psychological need to have presents under the tree; to continue the lifestyle to which they've become accustomed," Paulins said.