Sears stores bringing back layaway plans - East Valley Tribune: Business

Sears stores bringing back layaway plans

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Posted: Monday, November 17, 2008 7:05 pm | Updated: 11:35 pm, Fri Oct 7, 2011.

A payment plan that began in the Great Depression and largely disappeared from stores by the 1990s is coming back as East Valley residents cope with a worsening economy.

Sears Holdings Corp. resumed its layaway program after shedding it nearly 20 years ago, and experts predict other major chains will soon follow with programs of their own as they scramble for new ways to lure customers.

Layaway allows consumers to make payments on merchandise while it remains in the store's possession. There is no interest charged to the customer. The store usually requires a deposit, and it may require a restocking fee if the customer doesn't finish paying for the merchandise.

George Rosenbaum, co-founder of the consumer research firm Leo J. Shapiro & Associates, said that while it really took off in the 1930s, layaway is nearly as old as commerce itself.

"It may have been informal," he said. "There was a time ... where proprietors knew their customers by name. The merchant would hold the merchandise, maybe even without a deposit."

Ellen Davis, a spokeswoman for the National Retail Federation, said most retailers dropped their layaway programs by the late 1990s.

"For many retailers at the time, it made sense to get rid of layaway because it was a program that customers weren't using," she said. "Americans had very easy access to credit, and we had become such an instant-gratification society, people didn't want to put something on layaway and not receive it until they were actually able to pay for it."

The few companies that retained their layaway programs include TJX Companies, which owns Marshalls and TJ Maxx stores, Burlington Coat Factory and Kmart, she said.

Larry Childers, who was shopping with his wife, Debra, at the Sears at Fiesta Mall at Alma School Road and Southern Avenue in Mesa, said he expects to save "$300 or better" this Christmas by using layaway.

Childers cited the myriad reasons he uses the payment option. For one thing, he said, it saves him the headache of making costly credit card payments and any associated interest if he carries a balance.

"You've got 90 days to get your money together (to purchase items)," he said. "Those credit cards will eat you up."

Childers also said he likes layaway because it enables him to reserve merchandise until it goes on sale.

Rosenbaum said he expects retailers like Kmart and Sears to earn a good chunk of their holiday sales from customers using layaway.

"I would not be surprised if as much as 7 to 10 percent of Kmart's Christmas sales were on layaway," he said.

That success will be hard for other retailers to resist, and they'll likely start their own layaway programs as competition heats up and the economy continues to get cooler, he said.

But if it does catch on within the industry, it won't likely happen until after Christmas, he added.

"Anybody who is a major chain who has not planned for this for some months may not be able to really get it going for Christmas," Rosenbaum said.

Whether layaway becomes more popular depends on the economy next year, Davis said.

"It's possible that this will all be behind us, but if layaway does very well this year and if retailers feel that their competitors with layaway were taking something away from them, then they might consider bringing it back. Retailers need to balance what their customers want in all of this, and for some retailers, layaway makes a lot of sense."

Tom Aiello, Sears' vice president of public relations, said the company resumed its program after seeing a substantial increase in customers using it at the company's subsidiary, Kmart.

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