Wal-Mart brings back layaway for holidays as consumers continue to struggle

September 8, 2011

Wal-Mart announced Thursday that it is bringing back layaway for some merchandise this holiday season, part of the big-box behemoth’s efforts to recover from recent missteps and draw back customers struggling to make ends meet.

The company had discontinued layaway in 2006, during the heady days before the recession. Layaway allows shoppers to put merchandise on hold and pay for it in installments, and Wal-Mart said that resulted in crowded storerooms and headaches for employees. Meanwhile, demand for the service had dropped off as customers favored the immediate gratification of paying with credit cards, it said.

But that was before housing values plummeted, the unemployment rate soared and the nation’s financial system verged on collapse. As the era of easy credit began to wane, layaway staged a comeback: Sears reinstated it in 2008, and sister company Kmart made it a signature piece of its holiday campaign that year. Toys R Us launched its layaway program in 2009.

Wal-Mart said it decided this summer to bring back the program after repeated pleas from customers, including Facebook campaigns and online petitions. Several consumers said they began shopping at other retailers after Wal-Mart got rid of the service.

The retailers’ sales indeed suffered in recent years as its core customers remained entangled in the aftermath of the recession. Many are running out of money between paychecks more rapidly, executives have said, and they have cut back even more on discretionary purchases. Chief Merchandising Officer Duncan Mac Naughton said high gas prices, constrained home values and the tight job market are the biggest challenges facing Wal-Mart shoppers.

Layaway “is a key component that our customers asked us for . . . to make their lives easier,” Mac Naughton said.

The service will be available from Oct. 17 to Dec. 16 for purchases of toys and electronics. As in the previous program, shoppers must pay 10 percent of the cost upfront. Each product on layaway must cost at least $15, and the minimum purchase required is $50. However, Wal-Mart has added a one-time $5 service charge and a $10 cancellation fee.

All of Wal-Mart’s U.S. stores will participate in the program, and shoppers can put items on layaway at the Walmart.com counter inside stores. Layaway will not be available for online purchases.

“It plays to a need that’s out there,” said Madison Riley, managing director of Kurt Salmon, a retail consulting firm. “All they’re doing is adding to their tool kit.”

The retailer announced the move Thursday afternoon to store managers and on Facebook. Within two hours, more than 3,000 people “liked” the news on Facebook — and many called on the company to extend the service to all merchandise year-round.

“It’s about time. There are so many people on a budget that need layaway,” posted one Facebook user.

Mac Naughton said restoring layaway was part of Wal-Mart’s “continuing commitment to meeting customers’ expectations” as sluggish sales have forced the retailer to reverse course on several initiatives. The company put products back on its shelves that it had cut in an attempt to streamline its stores and refocused on low prices. Sales at existing U.S. stores fell 0.9 percent in the most recent quarter, although executives expressed hope that they would turn around late this year.

Mac Naughton said the company has not decided whether it will continue layaway after the holidays. (Wal-Mart’s year-round layway program for fine jewelry, which it never discontinued, will not be affected by these decisions.) It plans to prominently market the program as it launches its holiday campaign.

Prices for several toys, such as the LeapFrog Scribble & Write and Transformers 3 Mechtech, will be reduced to $15, the amount needed to qualify for layaway. In addition, Mac Naughton said, Wal-Mart plans to begin rolling holiday merchandise this month, two weeks earlier than usual, starting with Christmas decor.

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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