Layaway Plans Retooled for Current Economic Environment

Navigator Edition: October 2012
By: Jeff Avery and Tim Skeen

With the upcoming holiday season, major retailers including Wal-Mart, Sears, Toys ‘R’ Us, and Best Buy are promoting layaway plans to extend the buying power of their customers.  These plans provide customers the ability to make regular down payments for qualified merchandise while the store reserves the goods until full payment is received.  Layaway periods have been extended this year with Wal-Mart supporting plans as long as 90 days in hopes to cast a wider net over cash-strapped customers.  It is not surprising that non-traditional payment methods such as layaway have surfaced in the current environment as many consumers remain reluctant to borrow and continue to spend frugally.

Merchants have typically charged a service fee for opening the layaway plan, but increased competition has resulted in new approaches to layaway programs.  Wal-Mart first cut its $15 service fee to $5, and now offers a rebate card for the $5 fee upon final layaway payment.  Toys ‘R’ Us currently waives fees for all accounts opened prior to October 31, and Sears has also eliminated service fees completely at its stores (including Kmart) for the holidays.  Additionally, certain retailers now offer fee-free layaway cancellation. At the same time, there have been significant enhancements to increase the mainstream appeal of layaway programs through national advertising campaigns and improved marketing collateral.  In some cases, consumers are using layaway to secure access to gifts in advance of any inventory challenges should demand exceed supply.

There are also several derivatives of layaway in the market, including the QVC “Easy Pay” and HSN “FlexPay” programs, which will ship a product to a consumer after only a down payment.  Customers are required to link a credit card for automatic withdraw of their recurring payments, but the installments are evenly distributed and do not include premiums or interest charges.  Customers benefit from up-front delivery of the goods.  In addition to traditional retailer-based programs, there are third-party providers, such as, that offer layaway plans. directly supports several retail affiliates, including Best Buy, the Apple Store, Jo Ann Fabrics and Bass Pro Shops.

The increased focus on layaway programs reinforces the challenges facing many consumers this holiday season.  The budgets of many U.S. households remain very tight and access to credit and consumer reluctance to borrow are strong headwinds for the economy.  Retailers are pulling out the stops this holiday season with initiatives such as more aggressive promotion of price matching campaigns, pre Black Friday sales, extended store hours, free delivery, etc.  In many respects, layaway is just another arrow in the quiver for retailers, but we expect more widespread use of alternate payment plans in the future as challenging times will be a catalyst for new solutions or a reason to revisit legacy programs of the past with modern technology and fresh marketing.

For more information, please contact Jeff Avery, Analyst specializing in Card Issuing,; or Tim Skeen, Associate specializing in Card Issuing,

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