From pencils to puppies, layaway is back and online

As the back to school shopping season winds down amid Labor Day sales, a classic trend has found new life. Layaway, which many parents who are tight on cash have used to buy school supplies, is emerging as a major force in the holiday shopping season.

"There's definitely an uptick," said Heather Dougherty, Director of Research at Hitwise, a New York-based market research company. Hitwise's tallies show searches of the term "layaway" and its variations are up in August over the same time last year.
Sears Holdings Corp. (SHLD) wouldn't give figures, but said layaway business is definitely up. The company, parent of Sears and Kmart, has been making a strong push for layaway since last year. "The times are tight, credit lines are harder to come by," said spokeswoman Shannelle Armstrong. "People are looking for cash alternatives."

Sears Holdings anticipates layaway will be strong during this year's holiday shopping season, Armstrong said. It plans to advertise layaway for the holidays, like it did last year, with some announcements coming in October.

This time around, layaway has some interesting new features. Extending beyond clothes and housewares set aside behind the customer service counter at the local department store, the new program has shoppers looking online and buying more expensive items that they would have charged to their credit cards during the flush years.

Dougherty noted that some popular online searches include layaway of laptops, electronics and furniture. This hints that shoppers are looking at the alternative when buying big-ticket items, not just toys and clothing. In this vein, Sears announced in August that it had extended its layaway plan to include Craftsman snowblowers. Customers start paying as little as $15 a week in August toward a $699.99 snowblower, in the hopes of having it paid off by the first snowstorm this winter.

Consumers are looking for ways to control their spending, even when splurging, said Sergio Pinon, founder and chief marketing officer of eLayaway.com. "People are planning more and putting aside their need to have it now," he said.

Web sites such as Lay-Away.com and eLayaway.com, which offer a variety of products from different retailers, are another wrinkle in layaway's new popularity. While the expense of holding items that were not up for sale led some retailers such as Walmart Stores to kill off layway, online merchants can merely hold off on fulfilling a layaway order until it is paid for. That way, they sidestep the stocking problem while still bringing in a stream of income from layaway payments.

The weak economy has been a boon, said Pinon. His site went live in Aug. 2006 "with zero merchants and zero members," he said. "Back then, anybody who would let us put their (merchant) logo on our site, we accepted." Now, the privately-held company claims 70,000 members and 1,000 participating merchants. The last six months have been particularly strong, Pinon said. He wouldn't give figures, but said the site racked up more sales in the first quarter of this year than all of 2008.

You can't buy a llama on eLayaway.com anymore -- the llama farm closed down -- but you can buy puppies, season hockey tickets or even plastic surgery. Apart from working with mainstream retailers such as Best Buy and Home Depot, the site also offers more offbeat options such as cruise companies, medical centers and sports teams looking to sell season tickets.

"One thing we've learned is that affordability is relative," said Pinon.

He admits that once the economy improves, some consumers will go back to their previous spending. But Pinon hoped some will have learned new spending habits and others will need a while to dig up from under bad credit racked up during the crisis.

"There's a good decade of people that have to use this [layway] to get themselves back on track," he said.

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