Layaway attempts a comeback at retail
The old staple of layaway is still around this holiday shopping season at some outdoor and fitness retailers. SNEWS finds out why what’s old is new again and what retailers are saying.
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The old staple of layaway is still around this holiday shopping season at some outdoor and fitness retailers.
But while last year’s buzz on layaway was about helping credit-crunched consumers pay for larger ticket items like bikes, a home gym or skis, the payment option seems to be back to its more recent albeit minor role of helping Santa keep his gifts a surprise.
Layaway programs allow shoppers to put down a deposit for a product in exchange for the store to holding it until the remainder of the balance is paid in full.
“People take advantage of spreading out the payments, but I think it’s more about keeping the gifts out of the house,” said Mike Schroden, co-owner of Revolution Cycle and Ski in St. Cloud, Minn. “It’s pretty hard to buy a bike for Christmas and hide it in the house for a month. It’s one of the main reasons we’re open on Christmas Eve – people picking up their layaways.”
Revolution requires a 20 percent down payment for layaway, and it will hold the product for up to 90 days. Some stores also charge an extra fee or interest.
Convenience, but not a necessity
Schroden and other outdoor and fitness retailers said they offer layaway as a convenience for customers. They didn’t necessarily see a surge in layaway business during the economic downturn.
The demand for layaway has remained negligible for most of the last two decades, said Eric Pearson, president of Bill & Paul’s Sporthaus in Grand Rapids, Mich. Any upturn usually comes before the holiday season between September and November for big-ticket items such as ski equipment.
Bill & Paul’s has been around 50 years, and layaway “was a bigger deal in the 1970s and 1980s, before most people had credit cards,” Pearson said. When the credit crisis hit in 2008, Pearson noticed more people switching to cash and check payments, but not layaway.
At New York-based Gym Source, which sells fitness equipment online and in 30 stores mostly across the East Coast, the retailer doesn’t really have a set layaway plan, said Ray Muccioli, director of marketing.
“We haven’t really heard a demand for it,” he said. “If someone wants pay off a product in a couple of payments before we’re scheduled to deliver it, we’ll allow that. But most of the time, we’ll try and steer them toward our financing plans that we offer through several banks. Some of them are zero-percent financing, so there’s really not much need for layaway.”
A July 2010 SNEWS reader survey showed a majority of respondents among outdoor and fitness retailers saying their stores offered layaway (53 percent) or considered it (13 percent), versus 34 percent who didn’t offer it. The split was closer among respondents who thought a layaway program was beneficial (53 percent) or wasn’t beneficial (47 percent). That was the same split among respondents who said customers have (53 percent) or have not (47 percent) asked if layaway was offered.
The predicted comeback in layaway may be fizzling because of consumers’ aversion to taking on more debt, no matter the type, said LaRae Marsik, vice president of business intelligence at the Outdoor Industry Association, a non-profit trade group in Boulder, Colo.
The association doesn’t collect specific figures on layaway, but general industry data shows consumers favoring coupons and point-of-sale discounts over financing incentives this year, Marsik said.
“They’re coming in with a ‘buy now, pay now’ approach”, she said. “Or they’re waiting for the best deal. Their driver is the deal.”
Another point to consider – while credit may have been tougher to come by, interest rates have remained low for most shoppers with good credit. There’s not much advantage gained through layaway, especially with some stores charging extra interest and fees. But if the borrowing rate were to spike along with inflation, as it did in the 1970s, layaway could make an actual comeback.
Tapping younger generations
Layaway also might need a boost from marketing departments. When Canadian skate and snowboard shop East Side Board Supply decided to offer layaway in its stores, it realized most of its customers were too young to remember the term from its heyday.
So it cranked out a YouTube video called “Layaway your snow gear,” to help inform its clientele.
“So you have six weeks to pay off the complete getup — so you’re not broke, you can keep some food in the fridge and keep some money in your pocket,” East Side Store Manager Brenton Garnhum exclaimed in the video.
“Layaway works well for us,” said Rodney Mann, who is in charge of multimedia and public relations at East Side. “We have a lot of younger people looking to buy things and since they don’t usually have a lot of money at one time – and since kids generally aren’t very good at saving a lot of money up at once – layaway is a viable option for them.”
— David Clucas