Stores revive layaway plans for holiday shoppers as economic crisis tightens

Layaway makes a comeback this holiday season as consumers look at ways to try to stay within a budget in the current economic crisis. Retailers hope it helps boost business.

Olga Valeriano has found an old solution to her new budget crunch this holiday season: shopping on layaway.

The concept that went out of style with the rise of credit cards in the 1990s is making a resurgence this holiday season among shoppers like Valeriano.

At Kmart, she can put 10 percent down and spread out biweekly payments over eight weeks. At the end, she'll have the Guitar Hero and other toys her two sons want in time for Christmas. It's a big help for the stay-at-home mom whose husband's income has suffered with the falloff in construction work.

''This will give us time to get the money together,'' said Valeriano, 44, who was checking out items for layaway this week at a Hollywood Kmart.

Kmart hopes layaway will help lure new customers this holiday season, which is one reason the retailer is aggressively touting the program in national television commercials. And sister company Sears announced plans this week to revive its layaway program after an almost 20-year hiatus. Starting this weekend, Sears shoppers can use layaway at almost all departments, except home appliances and home electronics.

''Consumers told us all of a sudden layaway is relevant to them,'' said Tom Aiello, spokesman for Sears Holdings, parent firm of Kmart and Sears. ``People want to shop smart this holiday season. Layaway has become a real common sense way of staying within a budget and having a good holiday season.''

Layaway first became popular during the Great Depression. But after several decades of consumers used to whipping out the plastic and getting instant gratification, some experts believe the return to more frugal values is a much-needed change.

''It's harder for consumers to get credit and a lot of consumers are already buried in debt,'' said Tony Gao, marketing professor at Northeastern University in Boston. ``Layaway plans are all about delaying gratification. I think that's good for consumers because excess borrowing caused a lot of today's financial problems.''

Most retailers got out of layaway in the 1990s and post-2000 as credit cards became ubiquitous and the programs became too expensive for retailers to administer.

Wal-Mart was one of the last holdouts. The world's largest retailer eliminated the program in 2006 and has no plans to get back in the business this year.

''We feel the best way for Wal-Mart to help customers is to keep prices as low as we can,'' said Anna Taylor, a Wal-Mart spokeswoman. ``Traditional layaway programs can be expensive and the costs get factored back into the cost of products.''

But some Marshalls and T.J. Maxx stores still offer layaway, as does Burlington Coat Factory. For many retailers, it's a case of looking for any strategy to drive business during what is expected to be the worst holiday season in years.

Layaway use is up about one-third over last year's volume at the Burlington Coat Factory at the Dolphin Mall in Doral, said Carlos Cardona, the store's assistant general manager.

''We're seeing an increase this year because of the economy,'' said Cardona, who is using the program himself. ``People don't have money.''

The 21st century version of layaway has gone online at eLayaway.com. The website by a Tallahassee company offers online layaway services for about 1,200 retailers, including Gap, Apple and Bass Pro Shops.

Registered users have exploded from 10,000 at the beginning of the year to more than 75,000 now, said Michael Bilello, eLayaway.com's vice president of business development.

''There is an entire population of Americans that has always used layaway,'' Bilello said. ``The only reason they stopped is because retailers stopped offering it. This is going to continue to grow as Americans look for tools to remain debt-free and fiscally responsible.''

That was what attracted Fred Johansen to test out eLayaway.com. Johansen is already trying to pay off balances on three credit cards and doesn't want to add to the debt.

He recently finished paying for a Mac computer on eLayaway.com and has now started making payments on some golf clubs for a Christmas gift for his dad.

''I'm trying to preserve and build my credit because I know I'm going to need that to buy a house in a couple of years,'' said Johansen, a 28-year-old graduate student who lives in Hollywood. ``This is a way for me to get more disciplined with my budgeting of my money.''

Layaway allows shoppers to spread payments over 30 to 60 days, without racking up interest, as on a credit card. Most layaway programs typically charge a service fee in the neighborhood of $5, or 1.9 percent in the case of eLayaway.com. If customers decide not to go through with the purchase, they get most of their money back minus a cancellation fee.

To start a layaway, stores require a deposit, usually between 10 percent and 20 percent of the cost of the item. There's also some restrictions on what items can be bought on layaway. At Kmart, exclusions include alcohol, perishable items, plants, cellphones and computers.

''It's very convenient,'' said Sharon Barnett, 41, a Fort Lauderdale resident who already put about $100 worth of toys on layaway at Kmart for her daughter. ``You know exactly where you are on your spending. After the holidays, I don't have bills to pay off.''

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