The Courier Journal (Louisville; CFED)
By: Jere Downs
October 5, 2012
Lisa Woosley hauled a Dell desktop computer and flat-screen monitor to the layaway counter at the Walmart in Valley Station on Wednesday - kicking off her Christmas shopping season.
Woosley said layaway is one of several tools she uses to manage her money.
"I have a couple of credit cards, but I only use them for emergencies," said Woosley, 53. With layaway, "I will figure out how many paychecks I will get between now and Christmas and make payments."
Catering to an increasing number of such shoppers who are interested in carefully planning out holiday purchases, Walmart started its layaway program in September, a month earlier than last year.
Layaway's recent revival at Walmart, Toys "R" Us, Kmart, and such online services as elayaway.com are signs of consumer spending changes in the wake of the recession. One in 10 consumers are "very likely" to use a layaway program, and 34 percent are "somewhat likely" to use layaway this holiday season in a telephone survey of 2,100 adults last month by CouponCabin.com, an online coupon website.
Walmart will keep a $5 service charge if the layaway is canceled. Kmart, which will keep $10 for a cancellation, also charges a $5 contract fee. At elayaway.com, the customer is charged $25 or 10 percent of the item price. The remainder is refunded to a customer's elayaway account.
More than half of Kentucky and Indiana residents - 59 percent and 57 percent, respectively - have subprime credit scores that make it difficult to get or keep a credit card, according to CFED, a Washington nonprofit devoted to supporting economic policies that build financial security.
In Kentucky, one in three households do not have a bank account, or rely on payday lending or check cashing outlets. In Indiana, that figure is one in four households, according to CFED's annual "Asset Scorecard" released in September. One in four Kentucky residents also have no financial cushion for an emergency, and the average credit card debt in both states is around $8,300, below the U.S. average of $10,852.
Layaway "forces shoppers to be disciplined about saving and reduces impulse purchases," said Jackie Warrick, president of the website CouponCabin. But layaway programs can carry fees, and the shopper should consider all their options before committing to layaway, she cautions.
Layaway also helps retailers competing for scarce seasonal shoppers. That outlook seemed more upbeat as consumers expressed more confidence for the sixth straight week in a poll Sept. 30, buoyed by stable gasoline prices, and a slight creep upward in home prices.
The Bloomberg Consumer Comfort Index released Thursday reported that 50 percent of consumers surveyed had positive views of their finances, the most since July. And on Friday, the federal government reported the September unemployment rate slipped below 8 percent, to a 44-month low of 7.8 percent.
Still, retail analysts have been predicting holiday shoppers will spend more cautiously than last year. Analysts forecast no more than a 4 percent increase in 2012, lower than the 5.8 percent bump reported for November and December 2011 by the U.S. Department of Commerce. As a result, retailers will begin holiday discounts around Halloween, predicted Chris Christopher, an economist for IHS Global Insight.
"If the retailers are a little uncertain, they don't want to be caught with excess inventory," he said, adding stores will "start discounting sooner so they can get people through their doors."
Since the recession, "everyone's life has changed," Valley Station Walmart manager Ida Creek said, predicting that twice as many of her South End customers will use layaway this year as last. "In this community, this is needed. They are the working class. ... It helps them to pay over time to help their families have a good Christmas."
In 2007, about the same time credit was flowing freely at the peak of the housing bubble, Walmart terminated its year-round layaway program, Creek said. At the time, too many consumers did not fulfill layway contracts, and Walmart was stuck with more inventory than it expected, including winter coats and other items that were out of season after the holidays.
Creek credits a holiday-only layaway for a 150 percent increase in purchases of televisions, computers, and other electronics at her store since the program started three weeks ago. Selection is limited to such non-seasonal items as electronics, small appliances, select sporting goods and toys.
Electronics and toys compete as the top layaway choice, with average purchases ranging between $70 and $150, she said.
"We replace a credit card with our storage units," Valley Station Walmart assistant store manager Steven Dennis said as he surveyed cabinets stocked with layaway goods.
Elayway.com started its season last week touting its "Layaway Genie" shopping tool that helps consumers search for items online. Among 1,000 participating merchants with elayaway.com are Best Buy, the Apple Store, Bass Pro Shops and Jo-Ann Fabric and Crafts. For one-time customers, elayaway charges transaction fees beginning at 1.9 percent of the total. Customers who subscribe for $8.95 a month are not charged any transaction fees. Elayaway processes cash payment from customer bank accounts using such services as MoneyGram.
Toys "R" Us reintroduced layaway in 2009 after a long hiatus, company spokeswoman Jennifer Albano said, adding, "We continue to look for ways to help our customers stretch their budgets."
Layaway's resurgence is a result of consumers who have seen their credit marred by foreclosures, bankruptcies or job losses, said Amy Shir, a Louisville-based consultant on personal asset building and a member of the executive committee for Metro Louisville's Bank On program, an initiative to show local working poor the benefits of using traditional bank accounts instead of expensive paycheck cashing services.
"People still have Christmas coming up. They still have grandchildren," Shir said. Layaway offers "an affordable way to just bite off what they can chew now. They don't look at the future horizon. They can't."
After Bobbye Taylor's Social Security monthly disability check arrived at the start of the month, the 58-year-old went to her Walmart on Thursday and began a $516 layaway account with gifts for her grandchildren this Christmas.
"Five years ago, I had some money. Layaway helps me plan now to take care of my grandchildren," Taylor said, adding that she became disabled in recent years and could no longer work as a lab technician. In addition, she estimated that her Shively ranch home is worth just $60,000 now, not the $150,000 she paid in 2000. "I'm stuck there and can't sell. Everybody's been hit. I've got neighbors who are really struggling."
With regular payments of $60.15, Taylor has until Dec. 14, Walmart's deadline, to retrieve her purchases.
"Credit cards will just get you into trouble," she said, shielding the secret purchases from her grandson who stood by her shopping cart a few steps away. "This way I know I am set."