Wal-Mart brings back layaway

It’s not just the clothes strutting down the runway during New York Fashion Week that are making it feel like the 1970s all over again. On Thursday, Wal-Mart Stores Inc. announced it would reintroduce layaway on electronics and toys to help struggling consumers make purchases in the holiday season.

“We’re always looking for ways to ease budget strain for our customers, and we know this holiday season in particular brings with it additional financial pressure,” Duncan MacNaughton, Wal-Mart’s chief merchandising officer, said in a statement announcing the new program.

According to The Associated Press:

Layaway – which allows shoppers to pay over time, interest- free, and pick up their merchandise when it's paid in full – became popular during the Great Depression. The practice had become largely a thing of the past as the economy flourished and consumers were feeling more confident. But when credit dried up, and the job market soured during the recession that began in late 2007, Sears and other merchants added back or expanded the service.

Wal-Mart will offer layaway at stores nationwide between Oct. 17 and Dec. 16. The stores will charge a $5 service fee to allow customers to purchase items on layaway and a $10 cancellation fee if they cancel or don’t pick up their purchases by Dec. 16. Items that cost $15 or more are eligible, with a minimum total purchase of $50 and a 10 percent down payment. If the program is successful, the Bentonville, Ark., company said, it may extend it throughout the year.

Wal-Mart, which canceled layaway for everything except jewelry in 2006, is trying to reverse declining sales at its U.S. stores, Bloomberg News reports. The company’s revenues have declined for nine straight quarters.

About 55 percent of Wal-Mart customers use cash for payment, Marketwatch reports.

“The layaway business has always been a tough business to make it profitable,” BMO Capital Markets analyst Wayne Hood told Marketwatch. “By getting out of layaway program, that was one way (for retailers) to reduce costs. Now you bring it back because there’s a need for it. In this environment you have to look at every way you can help customers out. They are living week to week. It’s one tool to help boost sales for (Wal-Mart’s) core customers that continue to struggle. You can look at it as a loyalty tool.”