Return of Layaway:

The great consumer credit story of the past 30 years has been the general substitution of credit cards as a source of consumer credit for old-fashioned forms of credit, such as installment borrowing, personal finance companies, and layaway. Two years ago Wal-Mart, which had been one of the last major retailers to offer layaway, discontinued that service.

It that vein, it is interesting to note that both Kmart and Sears have announced that this Christmas they'll be reviving layaway. The reason seems clear--because of the credit crunch, consumers are having trouble using their credit cards. Credit lines are being reduced and credit issuance is tightening up. As this preferred line of credit dries up, consumers are rolling back the clock to some of the older forms of credit, such as layaway. The end result is that a lot of consumers will "borrow" just as much as they have in the past, but it will just take a different form.

I've remarked before that just once I'd like to see a January press release that says "Credit card debt reaches all-time high; layaway and retail installment credit reach all-time low." But, of course, financial reporters don't seem to recognize this substitution effect. Perhaps this year the revival of layaway will help them to see that.

BTW, I've never been able to find any really good data or sources on layaway. My impression is that at its height, it was a highly significant part of the consumer credit economy. But I've never seen any measurements. It may be that it was lumped in with other installment debt. But if anyone knows of any good sources that discuss the development and peak size of layaway, I'd be interested in references.

John Moore (www):
I suspect this is not a direct substitution of layaway for credit cards. The stores using layaway have a significantly different set of incentives than credit card lenders. While I don't know the effect of this, it will certainly be non-trivial.

For example, how will interest rate (always in there someplace) be chosen? How will risk be rated? Will the marketing of layaway prevent matching interest rate to risk?
11.16.2008 1:56pm
Anonymous4321 (mail):
To what extent does layaway constitute an extension of credit to the consumer? My understanding of the terms are that the consumer must pay the full cost of the item (over time), and only after that does the retailer hand over the product. If anything, in the main, doesn't layaway constitutes the consumer's lending money (and extending credit) to the retailer?

(Yes, the retailer takes the risk that the consumer will abort the payments in the middle after only partial payment has been made, leaving the retailer with a stocked item that he could have sold to somebody else earlier. But with (a) sophisticated inventory-management techniques that major retailers have adopted, and (b) layaway penalty fees for cancellation, I think this economic risk is small and a ancillary effect.)

Overall, layaway seems to involve the consumer's extending credit to a retailer -- since the consumer advances money to the retailer for an eventual later transfer of product. So I'm not sure to what extent this is comparable to consumer debt.
11.16.2008 2:03pm
KenB (mail):
For example, how will interest rate (always in there someplace) be chosen? How will risk be rated? Will the marketing of layaway prevent matching interest rate to risk?
As best I recall, I've never bought anything on layaway, though I'm old enough to have done so. With that preface, what interest rate?

According to my understanding of a layaway transaction, the customer makes payments periodically, but the seller does not deliver the merchandise until 100% of the price is paid. At least in cases in which the merchandise is commonly in stock, the only "interest" involved is that the seller has use of the buyer's money before the transaction is consummated. And I doubt a price break would be given to the customer on that account.

Admittedly, the situation is different in cases in which the seller has to physically set aside merchandise to assure it is available if and when the customer pays off the contract. Then the seller is out at least opportunity cost. It's most likely out real dollars in the amount of the interest rate on inventory financing. I don't know, but I would expect that the seller would build that into the price.

But the seller bears no credit risk as to the purchaser. To the contrary, the purchaser, generally unwittingly, bears credit risk as to the seller. I have not handled a bankruptcy claim in many years, but my recollection is that layaway customers are unsecured creditors in a bankruptcy proceeding.
11.16.2008 2:10pm
PeterWimsey (mail):
Is it really accurate to consider layaway as a type of "credit"? At least as I (hazily) remember layaway, it involved the retailer holding an item for you while you made partial payments. After your payments equalled the cost of the item, you were allowed to take it home - but not before. Of seems more like forced savings than credit. But maybe there are creditlike refinements of which I am unaware?
11.16.2008 2:11pm
Another point to consider is that credit cards provide immediate gratification, while layaway requires money-up-front and waiting. Surely we're talking about two different populations here.
11.16.2008 2:14pm
Shivering Timbers (mail) (www):
Is it really correct to call layaway "credit?"

Layaway is really a form of prepayment, and (at least as traditionally understood) does not involve extending any credit to the customer, and has no risk of default. It's more like a special-purpose savings account.

As it's usually been practiced, when a customer asks to buy something under layaway, the retailer will physically move the item off the floor but not give it to the customer. The customer arranges to pay for the item in a series of payments, and when the item is fully paid, the retailer gives it to the customer.

If the customer stops paying, the retailer puts the item back up for sale and gives the customer his money back minus a restocking charge (I think the restocking charge is a recent innovation).

The main risk in this transaction is that if the customer walks away the retailer will be left with excess inventory for a (potentially) out-of-season or obsolete item. That's a very different sort of risk than with extending credit, where the risk is that the customer defaults and the creditor has to absorb the full retail price with nothing to show for it.
11.16.2008 2:15pm
Christopher M (mail):
Several people have already asked my question, which is, how does layaway constitute consumer credit at all?

Also, what is the benefit to the consumer supposed to be in a layaway transaction? Why not just save up your money until you can afford the item? I guess you can lock in a price, which might be valuable in a time of steep inflation. And you protect yourself against the risk that an item will go off the market. But how often does that happen (without the item being substituted by a better item at more or less the same price)?
11.16.2008 2:35pm
CB55 (mail):
I'm not sure if lay-away procedures has changed. When I started out as a child you paid for that TV up front or you paid for it with installments on lay-away - there was no interest. The incentive was that if you missed a payment the store placed that TV back on the shelf. These were the days before the masses owned credit cards - before Master Card or VISA, you used cash. Only a few major stores such as Sears Roebuck, JC Penny's and Montgomery Wards had their own credit cards, but even they allowed lay-away. I think most people by and large frowned on credit cards - they believed that if you could not afford to pay for it why charge it.
11.16.2008 2:59pm
Christopher M:

Not all goods remain on the market forever or are substituted for. For instance, when I was a kid, my parents would occasionally buy me lego sets on lawaway. Lego sets would be produced for a limited amount of time, after which Lego would produce different sets. For instance, Lego's "Blacktron" spacecraft sets were replaced by Lego's "Megatron" lego sets. I found the Blacktron sets aesthetically preferable to the Megatron sets, and lawaway was a great way for me to ensure that I got the lego set I wanted.

Also, if a store simply runs out of a product, it's not a given that there is another store that sells it in the area. You might be in a small town, or you might be unable to travel long distances. And this was the pre-internet era.
11.16.2008 3:26pm
Also I'm sure that there is some kind of joy or happiness that comes from knowing you have quasi-ownership of the item on layaway. You have exercised your will to power by intervening in that item's natural life and causing it to be moved. There's gotta be some value to that for a lot of people, even if a blog filled with rational economists won't admit it.
11.16.2008 3:29pm
A. Zarkov (mail):
Kmart and Sears are on the rocks. Bought by hedge fund managers who know nothing about retailing and are not only losing their shirt, but vital parts of their anatomy as well. They thought that since they were buying cheap that would be enough.

I suspect the lay away is a gimmick to try to get customers they have lost. Good chance these stores will be out of business next year.
11.16.2008 3:35pm
A. Zarkov (mail):
People buy too much crap. Things they don't need that get used once and put away for a garage sale someday.

I have always paid cash for everything. I save. I shop. I drive a hard bargain. I have no debts. I buy what I think I will use all the time. I avoid paying sales tax at almost all costs. I hate giving the state of California my money because I know they will waste it, and I know they love deadbeats and spendthrifts.
11.16.2008 3:40pm
Lay-away can charge 0 interest for the simple reason that credit is in the reverse direction -- the store is borrowing money from the customer, not the other way around, just as in a vacations savings account the bank is borrowing money from the depositor, not the other way around. In lay-away the store receives the money first and then gives the good. In a completely fair transaction the store ought to GIVE interest for the right to have the use of the customer's money before it has to deliver anything. How could it not be in the store's interest, particularly if the store gets to keep all or a good portion of the money if the customer doesn't complete the transaction. As in fractional reserve banking, the store doesn't have to actually keep everything laid away on-hand, it simply has to keep enough on stock to meet demand -- exactly what it tries to do anyway. Money for nothing! How could a store not like?

This is not to say that giving a store a zero-interest loan is not a bad idea, particularly if the store promises not to sell the last item of a popular purchase as consideration. But it's a savings plan, not a form of credit. Which the party gives its part of the deal first and which party complies later matters.

Just because it's a corporation doesn't mean the customer is automatically in its debt no matter what the transaction. This isn't the feudal system yet.
11.16.2008 3:40pm

I suspect the lay away is a gimmick to try to get customers they have lost

You say that like it's a bad thing to try to regain market share. If it works, good for them. If it doesn't, they haven't lost much.
11.16.2008 3:41pm
crane (mail):
Buying on layaway is also useful when you're dealing with a small store that doesn't keep everything in inventory constantly. The store I work for is always buying merchandise in small quantities and then not restocking things for months after they've sold out. Not that our customers buy things on layaway much - I think we've only had one in the last couple of years - but we draw from the affluent suburbs, so everybody uses normal credit cards instead.
11.16.2008 4:07pm
lucia (mail) (www):
From the point of view of reducing the amount of crap people by, credit cards being difficult to obtain and stores providing layaway is an idea system (particularly if there are restocking fees.)

I suspect most people will think twice before putting down a deposit and committing to payments for impulse buys. These same people might purchase with a credit card, as that gives them instant gratification of owning something.
11.16.2008 4:09pm
trad and anon (mail):
I agree with everyone else that insofar as layaway is a form of "credit," it runs in the other direction.
11.16.2008 4:12pm
Christopher M (mail):
Some of the points about the utility of layaway are reasonable, but they don't explain why noted bankruptcy/credit expert Todd Zywicki believes that layaway is a form of consumer credit. Certainly when credit is not available people will do things other than use credit but that seems like quite a different point from the one this post is trying to make.
11.16.2008 4:13pm
arbitraryaardvark (mail) (www):

I have always paid cash for everything. I save. I shop. I drive a hard bargain. I have no debts. I buy what I think I will use all the time. I avoid paying sales tax at almost all costs.

I aspire to be Zarkov. What are your techniques for avoiding sales tax? I can think of 5 methods, but you might have one new to me. [Have my own retail license, have my own nonprofit, buy online, buy mail order, barter, do without.]
11.16.2008 4:19pm
speedwell (mail):
IANAL, but I worked in retail when I was in college, and I've been both a buyer on layaway and a seller of things on layaway. Some thoughts:

As a buyer, layaway allowed me to buy things when they went on special. I was poor and I never had the full price of, say, a winter coat, at a given time. Coats, to continue the example, come in limited quantities, and the size I wore at the time sold out very quickly. If I saw a good, durable, stylish coat in my size, and then I waited to save up the money, the coat just wouldn't be there when I got the money together.

Layaway was also a good way for parents to make sure they had enough school clothes for the kids at the right time. Lots of parents without credit cards couldn't afford to put down the money for the year's clothing all at once. Prices for school clothes tended to be lower at the end of the school year and in the summer.

Sellers liked layaway because it made buyers buy more. As a sales girl ("associate?" Please.), I frequently made more sales by reminding people that they could buy one or two things they liked now, and put the rest on layaway. That way the buyer could have the feeling of getting everything they wanted. I would remind people that the interest rate on their cards was more than the cost of layaway (provided they paid off the layaway, which they were welcome to do early). Yes, I had customers pay layaway payments with credit cards.

The biggest hassle for layaway was having stockroom real estate taken up by the put-away stock. I don't think any store I worked in really cared that much about layaway "defaulters," especially once the restocking fee became common. If someone wanted an item enough to lay it away, once it went back out on the shelf, someone else would want it, especially if it was on the sale rack. Those of us who worked in the store would watch certain layaways like hungry stoats, hoping the customer would default so we could buy an item ourselves!
11.16.2008 4:39pm
speedwell (mail):
Oh, almost forgot the best win-win use of layaway: Babies. Sellers loved it because the expectant parents would come in flush with the exciting news and buy up the place. Buyers were happy about it because they could take the length of the pregnancy to pay off the cost of all the loot.
11.16.2008 4:41pm
Bama 1L:
Professor Zywicki seems to be using consumer credit as a shorthand for "ways people buy things they can't afford." It's certainly true that credit cards replaced layaway as a means for people to make such purchases, but that doesn't make layaway credit. Layaway seems more like a credit alternative.
11.16.2008 4:41pm

I have always paid cash for everything. I save. I shop. I drive a hard bargain. I have no debts. I buy what I think I will use all the time. I avoid paying sales tax at almost all costs. I hate giving the state of California my money because I know they will waste it, and I know they love deadbeats and spendthrifts.

Sounds to me like you probably avoid paying your use tax, too, which makes you a tax evader, in the eyes of the states of CA.
11.16.2008 4:53pm
Donald (www):
I worked for Wal-Mart for several years before law school (1994-2000). To the extent layaway can be considered "consumer credit," I guess it would technically be a zero-interest secured loan in which the lender takes possession of the security, with the borrower retaining the right to cancel the loan at any time prior to full repayment.

The problem for Wallyworld ultimately became that layaway was TOO successful. Because there was no interest and no restocking fee for cancellation, it was wildly popular (prior to the holidays) primarily among people with no bank accounts. In the months before Christmas, stores would literally rent trailers and stick them behind the store in order to store all of the layaway items. The last few days of the layaway season (always about 10 days before Christmas, to permit unredeemed layaways to be returned to the sales floor), there would be, in an average sized store, a team of 10 people whose sole responsibility was some part of the layaway process, whether working the register or grabbing items from the back or the trailers.

Interestingly, from the company's accounting perspective, an item was sold at the time it was placed on layaway. That meant that items on layaway were not considered part of a store's inventory, and a layway transaction was considered a sale. (That also permitted some numbers massaging--for instance, a store manager who wasn't going to meet his sales goal for the day/week might tell an assistant manager to put a couple high-ticket items on layaway, to be cancelled during a week when sales were better/higher.)
11.16.2008 5:30pm
Layaway, like Christmas Clubs, seems like a form of savings (albeit short term) rather than borrowing.
11.16.2008 5:44pm
Thanks for the insight Donald. Followup: do you think that retailers could make it profitable by taking a 5% (10%?) fee on canceled layaway?
11.16.2008 5:45pm
A. Zarkov (mail):

"What are your techniques for avoiding sales tax?"

The usual. Mostly buy mail order and on-line and do without. Craig's list is another way. For example I buy pet medications from a Canadian source which has an outlet in the Bahamas. I save almost half the price from their discount and don't pay sales tax. Indeed by treaty we can't tax their exports.
11.16.2008 6:11pm
A. Zarkov (mail):
"Sounds to me like you probably avoid paying your use tax, too, which makes you a tax evader, in the eyes of the states of CA."

Who in California doesn't avoid the use tax? I'll be the governor and the legislature does too.
11.16.2008 6:13pm
therut (mail):
What is a "Use Tax"????
11.16.2008 6:46pm
CB55 (mail):
I think lay-away is a good service for those on limited income, fixed income, have poor credit, no credit or simply do not wish to buy on credit. It beats renting or rent to own product services. Bankers do not want small accounts and have no desire to give the Working Poor of America credit cards but they are happy to cash their pay checks or a payday loan for an arm, a head, and their first born child.
11.16.2008 6:52pm
Layaway allows me to make "impulse purchases" more responsibly than with a credit card. If I buy something on layaway, I know I have a finite amount of time to work my spending plan so that I pay it off and bring it home. If I use a credit card, I can buy something and take it home right now and potentially pay it off in 15 years at the minimum payment.

Not the best use of resources.

And if I can't afford to pay it off within six weeks, or two months, or however long -- then I apparently can't afford whatever it is, period.

Funny how that works.
11.16.2008 7:01pm
Sammy Finkelman (mail):
Use tax is a law which probably all sattes that have a retail sales tax have paid that obligates someone who bought something outside the state on which sales tax was not paid opr on which less sales tax was paid, where byou would have paid sales tax had you bought it in your state in your county, to pay the amount of sales you saved. This
tax was called "use tax." It really was passed to legally collect money in cases where the state knew about it. The states passed it because they could not force the retailer on mail order and other things to collect the tax and I think Andy Tobias wrote about that.

(I don't remember whether that was in a book or a magazine article. I wasn't able to find that bquickly online but I did fins another somewhat whimsical refernece to "use tax" by Andrew Tobias from 1998:

(Nore paragraph 5 in which he alludes to that in passing)

I think in the case of cars it is collected rather automatically. The main places this might be collected isn in the case of paintings or antiques or jewelry or very high ticket items. Years ago there used not to be any form that anybody could file to pay as andy Tobias (I think) discovered. In response to that I think New York State fina;lly did create a form.

A few years ago (mainly really probably so that they could make up figures in their budget) New York State provided a simple way to pay this and a safe harbor. You simply add a ceratin percentage to your income tax. (This is not legally considered income tax by the way and not deductible on federal taxes. The safe harbor applies to any individual purchases of less than $1,000 not bought for a business. Those have to be itemized anyway.

As an alternative to the sfe harbor you have four pages included in the New York State income tax return which you can use.

See pages 66-72, particularly the worksheet instructions on pages 69-72, all written with a straight face.

At least you could use it if you write down any kind of purchase where this might apply and know the sakles tax in Pennsylvania which you might have been charhed and know whether you bought it say, on sales tax holidays or not or whether sales tax on clothing app;lied then. Almost nobody uses this safe harbor and I am not even sure tax software recognizes it even though they later added an instruction that this amount cannot be left blank (You can claim of course that you bought nothing outstate or by mail order that would have ben subject to sales tax if you would have bought it in New York State. I guess if a Senate Committee wanted to be very particular they could probably find that nearly any nomunee from New York state had evaded this tax.
11.16.2008 7:19pm
Sammy Finkelman (mail):
It was added to the New York State income tax forms for the year 2003. This actually reduced the legal tax owed because of the safe harbr and for the first time, people were able to legally comply with the law. But 97% or so didn't.
11.16.2008 7:28pm
Crunchy Frog:
What kind of idiot voluntarily pays use tax? The only time I would think it ever gets paid is on cars, and there really is no way to avoid it since it will get collected when you register an out-of-state vehicle.

Theoretically you could get away with maintaining your previous address (parents' house, or whatever) indefinitely. Just don't ever get a traffic ticket, or god forbid, be involved in an accident.
11.16.2008 7:57pm
Dr. T (mail) (www):
...because of the credit crunch, consumers are having trouble using their credit cards...
What is the basis for this statement? I have not read any reports that credit card companies are proactively decreasing credit limits.

I believe that the reintroduction of layaway plans is a gimmick. Stores expect the worst Christmas shopping season in decades, and store managers desperately seek ways to pull in shoppers. Layaway plans may appeal to older shoppers who used them in the 1970s, so stores reintroduce them (and advertise heavily).
11.16.2008 8:08pm
Sammy Finkelman (mail):
The United States Economic Census (done every five years in years ending in 2 and 7) apparently contains separate statistics for layaway sales:

"Sales include merchandise sold for cash or credit at retail and wholesale by establishments primarily engaged in retail trade; amounts received from customers for layaway purchases; receipts from rental of vehicles, equipment, instruments, tools, etc.; receipts for delivery, installation, maintenance, repair, alteration, storage, and other services; the total value of service contracts; and gasoline, liquor, tobacco, and other excise taxes which are paid by the manufacturer or wholesaler and passed on to the retailer."

That is assuming everything separate by a semicolon is a separate entry.

It might be that this is only true for years up to 2002. Here it is mentioned for 1997 and 1987:

11.16.2008 8:12pm
SenatorX (mail):
...because of the credit crunch, consumers are having trouble using their credit cards...

What is the basis for this statement? I have not read any reports that credit card companies are proactively decreasing credit limits.

Banks Trimming Limits for Many on Credit Cards

Nov 1 Sears, Home Depot May Lose 8% of Holiday Sales on Credit Limits
11.16.2008 8:28pm
Captain Ned:
@Crunchy Frog:

The cost of my safe-harbor use tax payment to the State of Vermont in 2007 was $40. Since I bought no single item exceeding $1,000 out-of-state and untaxed, yet purchase most of my consumer goods out-of-state and untaxed, I make out as soon as my total purchases exceed $666.67. I can assure you that I quite easily exceeded that amount. Ergo, the safe-harbor payment is a serious plus for me.
11.16.2008 8:40pm
Bama 1L:
I have not read any reports that credit card companies are proactively decreasing credit limits.

There has been a lot of reporting on credit card issuers unilaterally reducing credit lines.

Recent example story.

(Try Google if you want more.)

Does anyone know if layaway purchases reported to credit rating bureaus?
11.16.2008 8:54pm
Captain Ned:
@Bama 1L:

I doubt it, as layaway isn't really a credit transaction. The customer doesn't get the goods until full payment is made, so no credit is extended. My day job instincts (bank regulator, state-level) tell me that reporting layaway fails to credit bureaux would violate the FCRA.
11.16.2008 8:57pm
Milhouse (www):
It's been about 35 years since I bought something on layaway. I don't recall making any partial payments, and I certainly didn't pay any interest. They just put the item away for me, and I came back when I'd saved up the money to buy it. The advantage was that it was on sale, and by putting it on layaway I got it at the sale price.

Then again, I was about 9 years old, and I don't remember how much the item cost but it would have been substantially less than $10. Probably around $5. So maybe they just did me a favour that they wouldn't have done for an adult buying an expensive item.
11.16.2008 10:28pm
Buck Turgidson (mail):
TZ seems to have a slight problem with reality. And the rest of the bunch should have been old enough to remember what "layaway" meant, but, apparently, have been trying to forget. Credit card purchase and layaway/installment purchase are not the same thing and are not different forms of "credit".

Increase in credit card purchases had given mass-market retailers an opportunity to pass the risk to financial institution while getting increased consumer confidence at the same time. But that's not why layaway and installment plans have gone the way of the corner store.

The thing that brought them down was not the ready availability of alternative credit. What killed them was consumer-protection laws. Layaway and installment plans were really value-added services that provided major retailers with extra cash. The flip-side was increased default risk and overlapping inventory that bumped up the taxes slightly. Then, again, these were mitigated by write-offs.

The way it work was that a consumer was faced with products that he could not normally afford. What the retailer would do is "work out a deal" whereby the sucker would be paying triple the costs even if it took him the rest of his life to do it, while believing that he was buying something "affordable". Sounds familiar? Yeah, it's the Rent-A-Center all over again. And you all remember how that went.

So, in comes the easy credit. Then come consumer protection laws tightening up. Then the identity-theft technological "break-through". What's with ID-theft, you ask? If the risk is not on the retailer, what do they care if the credit card debt is not to the person who's buying the crap? And credit card companies don't just eat the bad debt, but get a combination of write-off and insurance protection (some of it goes under "self-insured", hence the write-off). Yeah, the cost of credit might increase in the long run, but, meanwhile, everyone is happy. And inventory flies off the shelves--no need for layaway. And those consumer protection laws? Can't do much to the retailer if the retailer has nothing to do with the credit. Forgeddabout't!!

There were a number of other developments that have played into this--wider availability of previously hard-to-find items, web access (eventually), etc. Note, in particular, that the retailers that got into deep financial trouble were, for the most part, the ones that ran their own credit operations (not just store cards, but often also store-brand credit cards). When that well ran dry, over the years, either the operations went bust (Spiegel/Eddie Bauer having liquidated their credit operation), were sold (Sears, including even the burgeoning Discover Card operation), or brought the chains under (Montgomery Wards, anyone?).

So passing the buck (quite literally) was the thing to do. Yeah, economics degree will buy you a lot of clout in the legal world. What it won't get you is a sense of reality. Consumers did not abandon the "traditional credit" programs--the retailers did away with them because they were no longer as profitable as the alternatives.
11.17.2008 12:31am
Bill Twist:
I'd just like to point out something:

K-Mart has always had layaway.

At least, the K-Mart in my area has always had layaway, and in fact it is the only retailer I can recall that has had it consistently over the past few years.

Sears was purchased by K-Mart a few years ago. One would expect that Sears, now owned by K-Mart, would conform to K-Mart policies, especially since K-Mart started accepting Sears charge cards a while back.

This isn't really news, or an indication of economic times. Now, when Wal*Mart and other retailers bring back layaway, then it will be a story.
11.17.2008 7:45am
marc (mail):
Cf A Zarkov supra, speculating about SHC's gimmicky reintroduction of layaway. I work at S. and, believe me, the consensus of local management and employees is exactly as you describe it: 'Hoffman Estates' is f.ed up crazy mad with no understanding of retail. You know when we ('we' being the store management itself and employees: I am most definitely not management, ha) found out that layaway was being reintroduced? Wednesday morning-- Friday morning being when the new policy took effect. O the stories I could relate!
11.17.2008 7:59am
NickM (mail) (www):
Layaway never went away in collectibles fields. When the item is unique (or scarce), there's a powerful incentive to lock in a purchase to be paid over time.

It's also a way some people use to hide purchases from a spouse.

11.17.2008 4:14pm
Dav (mail):
My wife uses layaway because we are trying to quit the credit card habit and she feels good about doing it. Since Walmart no longer does it she is doing it at Kmart. Which means she has to go by the store every couple of weeks to make the payment. And since she's there anyway she does our normal shopping at Kmart instead of Walmart. The end result will be Kmart will end up with at least $1000 dollars that Walmart would have ended up with. Far more than the actual value of the item on layaway. I can't believe this is smart for Walmart to do.
11.17.2008 5:03pm
markm (mail):
I think Dav has identified the real reason layaway is profitable for stores: it ensures repeat visits during which the customer buys other items.
11.17.2008 7:20pm
Tony Tutins (mail):
Be very careful where you buy things on layaway. A number of retailers have gone bellyup already this year, and I expect weak sisters like Sears/K-Mart to join them.

To set aside funds for Christmas shopping, I would like to see the return of the Christmas Club. Putting money aside each paycheck for a modest blowout at the end of the year prevents debt while maintaining our duty to prop up the Chinese economy.
11.17.2008 8:43pm
One way to look at credit cards is as a major reduction in systemic risk in the retail industry. The vast majority of retail sales are now made in what amounts to cash for the retailer, at the point of sale.

Bad times hurt sales, but they no longer produce mountains of bad debt from consumers.
11.18.2008 4:29pm
MikeDT (mail):
I have no idea how many people bought things on layaway, but my mother definitely did all the time at Marshall's. I think one reason she put things on layaway is that there was no guarantee that the dress or shirt would be there by the time she saved up the money.
11.18.2008 10:21pm