The layaway plan is back
Layaway announcement on kmart.com
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Scott Jagow: It must be painfully obvious to retailers that this holiday season will be cold, dark and stinging. The sales numbers that came out this week were awful; It was the worst October in about four decades. So, it's probably gonna be an old-fashioned Christmas of frugality. But the stores aren't giving up -- they're getting a little retro themselves and bringing back an old stand-by. Stacey Vanek-Smith explains.
Stacey Vanek-Smith: Ah, the holidays -- time to decorate the tree, put on 10 pounds and max out your credit cards. Last year, Americans spent about $475 billion during the shopping season -- more than a quarter of it on plastic. Not this year, says Candace Corlett, president of WSL Strategic Retail.
Candace Corlett: We have a third of shoppers telling us, "I'm less likely to put things on my credit card now than I was a year ago." So there is more of a pay-as-you-go mindset.
In other words, a return to a ghost of retail past: layaway.
If you remember the Isley Brothers, you probably remember layaway; You pick out what you want, the store puts it aside, you pay a little bit each month and take it home when it's finally paid off. Credit cards pretty much made layaway obsolete, but retailers that kept their programs, like TJ Maxx and Marshalls, say business is booming this year. Kmart has made layaway the centerpiece of its holiday sales strategy.
Kmart VP Terry Brophey says, when credit began drying up, they knew layaway would make a comeback. It lets customers pay a little bit at a time and it also lets them get dibs on stuff now, so they don't have to risk some hot item won't be in stock by the time they've saved enough money.
Terry Brophey: Customers that perhaps had not thought of layaway, you could just see the light bulbs going on in their heads. So we knew early on that this was going to be big and, boy, it has already been really big.
Brophey says more than a million customers have used layaway so far this year. Smaller retailers are also getting with the program. At Lush, a posh shoe store in Los Angeles, model Rain Thomas shows off a pair of $400 sandals she just picked up on layaway.
Rain Thomas: Silver platform stilettos with rhinestone encrusted straps. They are gorgeous.
Thomas says she's putting her entire Christmas list on layaway.
Thomas: I am getting iPods for my brothers, because they need to catch up with technology. It's just easier for me to put all the items on layaway, pay it off and then at Christmas they're ready to go.
For the iPods, Thomas is using eLayaway. The online service has deals with more than a thousand retailers, including Apple and the Gap. ELayaway's Michael Bilello says this is layaway 2.0.
Michael Bilello: We've got travel on there, we've got day spas who do offer botox. We've got restaurants that offer gift certificates and large party packages. I've seen someone layaway an entire hair transplant procedure for $12,000.
Bilello says eLayaway signs up about a thousand new people a day. The average customer picks out about $600 worth of stuff and pays it off over three-and-a-half months. That's not exactly the instant gratification plastic offers, but model Rain Thomas says it has other benefits.
Thomas: When I do finally get that item, it's mine, it's paid off. That makes me feel a lot more responsible and more grown up than when I was 18 years old and I was buying things on credit cards that I couldn't pay back.
And on Jan. 1, you can scratch "pay credit card bill" off your list of permanent New Year's Resolutions.
In Los Angeles, I'm Stacey Vanek-Smith for Marketplace.