Do Layaway Programs Still Work?

A layaway program is a program where customers are allowed to make several payments for a product over time rather than paying the full price. The store reserves the product until the customer has finished making their payments, at which point they are allowed to pick it up.

Back in the 1930s-40s, layaway programs were widely used in the retail industry. This was a time when families were struggling to get by, so this offered an effective way for people to buy goods without jeopardizing the store's financial security. Although they aren't used as much as they once were, layaway programs seem to be gaining momentum in the retail industry. But are they really still an effective way to boost sales? And how should retailers go about implementing a layaway program? To learn the answers to these questions and more, keep reading.

Yes, Layaway Programs Do Work

When used correctly, layaway programs offer an effective way for retailers to generate more sales. They essentially open up an entirely new market for retailers to target. Budget-conscious shoppers who are unable to pay full price for a product upfront are allowed to make small payments over time for that same product. It's a win-win scenario for both the shopper and retailer, as the shopper benefits from making small payments and the retailer benefits from more sales.

Kmart has one of the longest running and most successful layaway programs in the county. Originally, they launched a layaway program over forty years ago, and it's since grown into a highly successful business strategy that other retailers attempt to mimic. 

Other national retailers with layaway programs include Wal-Mart, Toys R Us, Marshalls, T.J. Maxx and Burlington Coat Factory.

Tips For Launching a Layaway Program:

• Set up a special caged store room or area specifically for layaway purchases.
• Talk with a retail lawyer to help you draft clear terms and conditions.
• Define a percentage down for the initial deposit.
• Consider offering zero percent interest on layaway purchase (this is the same technique used by Kmart).
• Offer multiple ways for customers to make layaway payments, such as in store, mail, online and phone.
• Decide whether or not refunds will be allowed on unpaid layaway purchases.
• If the customer decides to cancel, and you allow refunds, perhaps you can charge a small cancellation fee to recoup some of the housing and maintenance costs.