eLayaway

The lure of layaway

For Toms River resident Michele Pecora, it makes perfect sense.

Pay a $5 fee and set aside holiday gifts, pay them off over time and pick them up from the store before Christmas.

"Especially with kids, it helps,'' Pecora said. "They want all these gadgets and stuff and to pay $200 for an item upfront is a little more intimidating than paying $20 a week, especially when you still want to get the item. You just can't afford it all at once.''

Layaway, which has been around for decades, is once again coming to the forefront as consumers struggle with the economy.

About a month ago, toy retailer Toys "R'' Us started a layaway program to help consumers purchase the "big gift,'' a selection of items from bikes and doll houses to pools and televisions. The Wayne-based company joined other retailers, such as Sears, Kmart, Burlington Coat Factory, Marshall's and T.J. Maxx.

Web site eLayaway.com also brings it online, offering layaway on items from various retailers, including Best Buy, the Apple Store, and Home Depot.

With the rough economy, people are looking for solutions, said Long Branch resident Patricia Valentine. ""People can go and pay a little at a time, rather then trying to buy what they can't at that moment,'' Valentine wrote in an e-mail.

It's a pretty simple concept. Take Kmart's layaway program, which it brought back in 2008 and expanded this year to include online orders, which are picked up at a local store. There's an initial $5 fee and a down payment of $15 or 10 percent, whichever is greater.

Afterward, consumers pay 25 percent of the amount due every two weeks over an eight-week period.

"To our customers, it is a very relevant way to take care of the needs of their family,'' said Mark Snyder, chief marketing officer at Kmart. "The take-up on layaway is quite high and the interest (in the program) is really quite high.''

Layaway goes back to the Depression era of retailing, said Bill Bishop, founder and chairman of Willard Bishop LLC, a retail consulting firm. "To a certain extent, there is confidence built into the fact that it is an institution,'' he said.

But the rise of credit cards changed everything. Layaway was no longer a necessity.

"When the credit card companies started sending cards to homeless shelters, no matter who you are, you had 10 cards, that was the end of layaway,'' said Howard Davidowitz, chairman and founder of Davidowitz & Associates, a New York City consulting and investment banking firm.

Now the credit crunch and the poor economy are bringing layaway back into some shoppers' minds.

"Most consumers can't pay their bills,'' Davidowitz said. "The consumer has a lot less credit available to them.''

Layaway is a way to pay for something over time rather than pay with a credit card, which can result in interest charges if you don't pay your balance.

"The idea that you have to save up for something, you didn't buy it or take it home until it is paid for, is a very nice thought,'' said Tod Marks, senior editor at Consumer Reports and author of its Tightwad Tod blog. "I dare say a lot of people would be in better financial shape if they were able to do that.''

But, still, layaway is not used that often by shoppers, he said. Credit cards have become a "no muss, no fuss way of having to deal with items.''

Some retailers, such as Target, do not offer layaway. Wal-Mart Stores has discontinued its program.

For many stores, it's just not popular enough, Marks said. Retailers have to store the items and have an accounting procedure in place to track them.

And if a layaway is canceled by the customer, the store has to put the item, which could be an out-of-season piece of clothing, back on the rack or in the discount bin, Davidowitz said.

"It is a bit of a pain in the neck,'' he said.

For some, it's a part of life. Burlington Coat Factory has had it in place for years.

"It has been a mainstay of our business for quite some time,'' said Debbie Zyskowski, senior vice president of sales at the clothings and accessories retailer.

And it has grown in popularity, she said. "When the recession hit home for every consumer, our layaway option became quite desirable and very advantageous for a consumer looking to make a purchase, pay over time and not involve revolving credit card charges,'' Zyskowski said.

Keansburg resident Beverly Walker-Anderson shops at Kmart and uses layaway.

"I don't have all of the money and I don't want certain things to be gone when I go Christmas shopping so I will lay a few things away,'' Walker-Anderson said. "This way, I'll know I'll have them for sure at Christmas time.''

But like everything else, consumers need to make sure they understand the terms of a layaway contract, such as fees and what will happen to their deposit if they cancel.

"You want to know before you decide that you are going to put something on layaway,'' said Susan Grant, director of consumer protection at the Consumer Federation of America. "It is not enough to be told afterwards on the receipt that this is the store's policy.''