Down Economy Propels Return Of Layaway

Parents and kids across the country are wrapping up their back-to-school shopping. Many are using credit cards to buy their backpacks, book covers and calculators. But some are turning to an old-fashioned payment plan that's made a comeback: layaway.

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RENEE MONTAGNE, host:

And around the country, families have been doing their back-to-school shopping, many, of course, using credit cards to buy those backpacks, book covers and calculators. Some are turning to an old-fashioned payment plan.

NPR's Jack Zahora reports that the layaway is back.

ZAHORA: For those who never bought something on layaway, here's an overview. If you want an item, you put it on hold at the store, pay a small fee, say $5, then make regular payments until you've covered the full cost. Only then can you take it home.

Many large retailers discontinued layaway by the 1990s, sighting customer's lack of interest. These days, with many consumers in credit card debt and retailers needing every sale they can get, layaway has returned to stores such as Sears. And at Kmart, which never got rid of layaway, a recent TV ad campaign is giving it a push.

(Soundbite of television commercial)

Unidentified Woman: I'm going back-to-school shopping at Kmart.

Unidentified Man: But it's summer. I…

(Soundbite of laughter)

Unidentified Woman: I like to plan ahead.

Unidentified Man: Ah, Kmart layaway.

ZAHORA: At a Marshalls store in Arlington, Virginia, Nicole Ryman(ph) just put a whole shopping cart full of stuff on layaway.

Ms. NICOLE RYMAN: Bed sheets, household items, (unintelligible), clothing, socks, shoes - you name it. Everything's in there.

ZAHORA: Ryman says she's using layaway because she's afraid of falling behind in her credit card payments. But just such as with credit cards, Ryman says layaway can be addictive.

Ms. RYMAN: Because it's easy. You don't have to put your money upfront right away.

ZAHORA: There are penalties if you don't finish your payments. They change from store to store, but there are usually fines, and in some cases, customers could lose all the money they've paid so far. But that's not stopping Ryman. She's already made her first payments on Christmas gifts.

Jack Zahora, NPR News, Washington.

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Amid Credit Crunch, Retailers Bring Back Layaway

Tammy Wyatt hangs a bag containing back-to-school supplies that a Kmart customer has put on layaway. i i

Tammy Wyatt, a specialist at Kmart in Conover, N.C., hangs a bag containing back-to-school supplies that a customer has put on layaway. Nell Redmond/AP hide caption

itoggle caption Nell Redmond/AP
Tammy Wyatt hangs a bag containing back-to-school supplies that a Kmart customer has put on layaway.

Tammy Wyatt, a specialist at Kmart in Conover, N.C., hangs a bag containing back-to-school supplies that a customer has put on layaway.

Nell Redmond/AP

Layaway is back.

For years the service was a staple of department stores that helped cash-strapped customers reserve merchandise and then pay it off later. But layaway, replaced by easy consumer credit, largely faded away by the 1990s.

Today, credit cards are maxed out, and struggling retailers have resurrected layaway to get shoppers back in the aisles. Sears is once again offering layaway, and Kmart, where the service was never discontinued, is giving the idea a fresh push with a new national ad campaign.

In one TV ad, a woman is putting her back-to-school items in layaway and boasts to a friend that she likes "to plan ahead."

At a Marshalls store in Arlington, Va., Nicole Renman was also planning ahead. She listed off the items going into layaway. For a small down payment, she will put them on reserve and pay them off later, either in one lump sum or in installments.

"Bedsheet, household items, children's clothing, socks, shoes," she said. "You name it. Everything's in there."

Renman said she's afraid of falling behind on her credit card payments, but layaway is easy.

"You don't have to put your money upfront, right away," she said.

There is a small catch, however. If a customer doesn't pay off the item, he or she can usually get a full refund but will be charged a penalty for not following through.

Howard Davidowitz, a New York-based retail analyst, said layaway is growing in some areas, but only about seven or eight retailers have gone back to it in a big way because for most of them it doesn't make economic sense.

"It's all this handling [and] processing," he told NPR's Ari Shapiro on Morning Edition.

"The customer comes in, pays $3 every week. It was a messy business, [and] most retailers, including Wal-Mart, did not find it profitable and gave it up."

The fact that any of the big retailers have gone back to layaway says a lot about the sorry state of the American consumer, Davidowitz said.

"I don't want to say that it's an act of desperation, but it does show desperation and weakness of the American consumer," he said.

It used to be easy for consumers to just charge even small items on their credit cards. But now the cards are at their limit or have been canceled, he said.

"Now, if the kid needs a pair of denim and a pair of sneakers to go back to school, that becomes a crisis. So, that couple of dollars means everything," he said.

"What it says is that the consumer is under enormous stress. If you're out of money and you're out of credit, layaway is a way to get something," he said.

Meanwhile, Renman, the Marshalls customer, said she is already laying away items for Christmas.

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