YOUR MONEY: Consumers turn to layaway for lower-cost items
HACKENSACK, N.J. -- You could call it a leading layaway economic indicator. At the Kmart store in Wayne, N.J., the room where big-ticket layaway purchases such as flat-screen TVs are stored is relatively bare. But the room where clothes purchases...
HACKENSACK, N.J. -- You could call it a leading layaway economic indicator.
At the Kmart store in Wayne, N.J., the room where big-ticket layaway purchases such as flat-screen TVs are stored is relatively bare. But the room where clothes purchases and smaller items are kept is packed with more than 100 bags filled with backpacks, lunch boxes, kid-sized underwear, and back-to-school clothes getting paid off a few dollars at a time in the store's eight-week layaway plan.
Layaway programs allow shoppers to pay off purchases in installments, while the store holds the merchandise until the final payment is received.
At the Kmart in Wayne, and at the chain's other stores around the country, layaway purchases for back-to-school are up significantly this year, as cash and credit-strapped parents turn to the set-aside plan as a budgeting tool.
"When the economy started to go down, layaway dramatically increased," said Steve Ludmer, manager of the Wayne Kmart. Ludmer and layaway desk supervisor Alonna McKinnon also have seen more customers using layaway for lower-cost items such as backpacks, socks and underwear.
"Most of the layaway customers are using it for those back-to-school clothing purchases, but while they're doing that, they're also throwing in the other items they know they'll need -- notebooks, pencils, the other smaller items," said Tom Aiello, spokesman for Kmart and Sears stores.
Christmas and back-to-school are turning into the two biggest seasons for layaway. "What we've found is that parents will sacrifice other things ahead of what they need to get for their children," Aiello said.
The National Retail Federation estimates the average family with children in kindergarten through Grade 12 will spend $548.72 on school-related purchases this fall. Layaway plans allow parents to select all their school merchandise at once, and pay for it over periods ranging from 30 to 60 days, depending on the store.
"I think it's great. It helps out with your budgeting," said Wanda Pantoja of Prospect Park yesterday, as she picked up $295 worth of back-to-school clothes and supplies for her daughters Briana, 12, and Jasmine, 5. "This lets you pay a little bit at a time, so you don't have to pay it all at once."
Kmart has offered layaway for more than 40 years, but the company has turned the service into a major marketing promotion in the current recession, which began in December 2007.
Sears, which is owned by the same parent company as Kmart, reinstituted layaway last November, in response to consumer demand. Sears had discontinued layaway about 10 years ago, Aiello said. Wal-Mart Stores Inc. stopped offering layaway in 2006, giving Kmart an opportunity to lure layaway shoppers.
New Jersey-based discount chain Burlington Coat Factory also is promoting layaway for back-to-school, with signs alerting shoppers to the service posted at store entrances.
Kathy Grannis, a spokeswoman for the National Retail Federation, said stores first began offering layaway plans in the 1920s, and that they became widespread during the Great Depression of the 1930s. But many stores dropped the programs beginning in the 1970s as credit cards became the prevailing retail currency.
"The majority of retailers had stopped using layaway," Grannis said, "because they found that the convenience of credit was a much more popular option for consumers. But those days have changed," she said. "More and more consumers are beginning to take a second look at how much the credit cards charge and layaway makes a great option for families trying to stick to budgets."
Grannis said she hasn't heard of many chains other than Sears reinstituting layaway. Rather, she said, those stores that have always offered layaway began advertising it and promoting it. "The resurgence of layaway last holiday season really showed those retailers were listening to shoppers who were complaining about not being able to afford purchases, or needing to spread out payments," she said.