eLayaway

Layaway plans making a comeback for holiday shopping season

Nostalgic shoppers are more likely to find something in stores this holiday season that hasn't been widely available for a long time -- layaway programs. Driven by the credit crunch and sagging economy, Toys R Us has joined a growing list of retailers reviving the once-popular payment plan in an effort to boost sales.

Introduced Monday by the nation's largest toy retailer, the program will allow shoppers to finance a variety of big-ticket items such as bikes and cribs without accruing any interest charges. After making a 20 percent deposit and paying a $10 service charge, customers can work off the balance through in-store payments. To bring the items home in time for the holidays, payments must be completed by Dec. 6, with a $5 fee for any canceled orders.

"I'm surprised we haven't seen more companies announce layaways at this point," said Ellen Davis, vice president of the National Retail Federation. "In an economy like this, many people like the idea of buying ahead of time, even if they can't pay for it in cash, without having to deal with a massive credit card bill in January."

A mainstay for much of the last century, layaways fell out of favor during the 1990s, after easy credit and a booming economy made the practice irrelevant to many consumers, prompting Sears and a number of other major retailers to discontinue their programs. Wal-Mart did away with layaway several years ago but does offer the option for fine jewelry, a spokeswoman said.

Last fall, as the economy sank to depths not plumbed since the Great Depression, Sears brought its layaway program out of mothballs, heralding its unlikely revival.

"It's working well for us," said Shannelle Armstrong, a Sears spokeswoman. "It definitely contributed significantly to our holiday sales in 2008."

This month, Sears and its sister chain, Kmart, both added online layaway programs -- another trend that seems to be taking off. Business has doubled this year at eLayaway, a Tallahassee, Fla.-based company that administers layaway programs for 700 online merchants, including Home Depot and Best Buy. The company charges a 1.9 percent transaction fee, collected in the first payment, with an average layaway transaction taking six to eight months. Cancellations are subject to a $25 fee, or 10 percent of the total amount collected, whichever is lower.

"This whole credit crisis has really pumped a lot of business into our space," said Jesse Stickle, a spokesman for the 3-year-old company.

Layaway transactions also are on the rise at Burlington Coat Factory, a New Jersey-based discount clothing retailer that has offered the program since 1972. The program gives customers eight weeks to complete a transaction, with a 20 percent deposit and a $5 service fee. Canceled orders are subject to a $5 fee, with the deposit and service fee also usually forfeited.

Whether the layaway plans boost holiday sales remains to seen, but some experts said it is an ominous economic indicator.

"A lot of people don't have credit," said Dan Howard, a professor of marketing at Southern Methodist University's Cox School of Business in Dallas. "It is a sign of hard times."

When the economy recovers and credit begins to flow, Howard said, the layaway plans may recede again into shopping history.

"You will have them as long as it's in the interest of the retailer to have them," he said. "When that is over, there goes the layaways."