Why Walmart Had to Bring Back Layaways

Walmart brings back layawayWhat took Walmart (WMT) so long to bring back layaways? Sears Holdings' (SHLD) Sears stores brought back their layaway payment plan in 2008. Now, three years later, Walmart is finally doing the same, but the retail giant could have used the shot in the arm a lot earlier.

Walmart has been struggling to end its declining same store sales (a key metric in judging a retailer's performance), which has faltered over the past nine consecutive quarters. Although net sales for the company increased by 3.4% and 1% in 2011 and 2010, respectively, comparable-store sales declined by 1.5% and 0.7% in the same periods.

It's no wonder Walmart is struggling: With massive unemployment and consumers still struggling to manage their daily costs, discount retailers have to pull out all the stops to win over new customers, or even retain the ones they have.

The key to keeping those customers is to present them with a value proposition -- in this case, offering them a layaway plan, whereby customers pay a small service charge for the option to pay for products in installments without paying any interest.

Deja Vu Not Soon Enough

Walmart had a layaway plan but shelved it in 2006, when it thought credit cards and gift cards had made the program obsolete. It probably should have never shuttered the program. Customer loyalties shift on a dime, and ultra-discount retailers such as Family Dollar (FDO) and Big Lots (BIG) have been luring penny-pinchers in the past several years.

Walmart says it might extend its layaway option through the year. The retailer expects the plan to win back its customers, increasing its customer base and reversing the negative comps trend. Walmart had better hope it's not too late.

Motley Fool contributor Abantika Chatterjee owns no shares of any of the companies mentioned in this article. The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Wal-Mart Stores.


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Jamie

I don't care for what our Kmart has they aren't very stocked with great stuff... I miss walmarts layaway

September 30 2011 at 1:39 PM Report abuse rate up rate down Reply
dellainosencio

I could not believe it when Wal-Mart was getting rid of lay-a-way. Their excuses of instore credit, gift cards and credit cards being the reason for cancelling Lay-a-way made no sense. I haven't used credit cards-store or major- for over 20 years and being a daycare provider that only makes $2.00 an hour per child (because of very young children of my own, I could only have 3 non related children in care) Lay-a-way was a great option. Putting money in jars never works when the sales in my small community are non exsiting and travinling to find them was not at all feasible (next major store 60 miles away). When our next "major" retailer closed their law-a-way in response, everyone went to Kmart. Kmart in our area never stopped the law a way. I was waiting in line and the customer in front of me asked if they were going to close theirs, the clerks response was, "No we are getting all of their customers". Because of this Kmart items, for the same item, are $2-5 more.
The "Money in a jar" usually went to auto repair, $4.55 a gallon gas (in 2007), food or other real nessecities.

September 28 2011 at 4:54 PM Report abuse rate up rate down Reply
msm0207

I did sympathize with the woman who wanted WalMart layaway so she could pay a little every period and buy something new. How about putting those few bucks in a coffee can and buying your hearts desire when it goes on sale, and it will, somewhere! Nakomis77 had the right response too. I was a single mom many years ago and the BofA had a Christmas club account. Paid a little interest and it was nice to save all year and then have a check for Christmas. I used to bank at a BofA near citrus packing sheds. The Hispanic women had Christmas accounts and I said something like that really helps with gifts and the reply? Saving for Property taxes! Dec due date. So many small towns that I visited had dying downtowns. Years ago when I visited those places and stayed long enough, the local merchant had old stock and not much of it. People started driving to the county seat for better shopping. WalMart coming in was a boon to many in the rural area. All big box stores have changed the shopping of America. I remember when there were independent appliance, book, toy, and yardage stores, etc. Now it is all chains with the same old, same old. WalMart gets blamed for the decline in book stores. I have bought two books at WalMart in my life, and I buy a lot from Amazon and book stores. The two books? A paperback because I was overnight with nothing to read and a Christmas Inspirational Book which I couldn't find at the book store. I think they had it but one had to search. The large chain bookstores were obvious in what they were being paid to do by the publishers. The face of business will change again. I really miss the department store choices I had. Robinsons, May Co, Broadway, etc. Now it is all Federated (Macy's). When I worked I bought a lot at Nordstroms. That has changed a lot in the last 10 years too. Nothing made in America for sure. Mervyns went out and now we have Kohl's. Not sure they learned the lessons of Mervyns, but we'll see.

September 27 2011 at 2:38 AM Report abuse +1 rate up rate down Reply
msm0207

Gosh, the nuts come out of the close everytime WalMart is named. I was in Target today. First time in several months. My, how things have changed. Not quite as friendly help as in other times an when I asked a cashier to call someone to the watch department, she argued with me. Someone nearby who was doing something with that cashier's register helped me. It is not a Target help thing, it was the personality of the cashier. Sad.

September 27 2011 at 2:21 AM Report abuse +1 rate up rate down Reply
Bob ( Vnam 67 )

The reason Walmart is doing the lay-away thing is because of the Holidays coming up, also they are telling you what you can & can not put on lay-away--WELL, what we should tell Walmart to take their lay-away and shove it where the sun don't shine. There are other stores that have had lay-aways when Walmart did away with theirs--so shop the other stores. ONLY MY OPINION ON THIS

September 27 2011 at 12:54 AM Report abuse +1 rate up rate down Reply
peggy way

Yep....we all knew it would be just a matter of time before Mr Target and Mr K Mart would be showing Walmart what PURE GREED will do for you. I for one haven't shopped at Walmart in ages! And I am SOOOOOOO GLAD the Dollar Store started selling groceries! Get in and out before you could spend the time to just get through the line at Walmart!

September 27 2011 at 12:37 AM Report abuse rate up rate down Reply
budwsr25

NO VIDEO GAMES!

September 27 2011 at 12:32 AM Report abuse +1 rate up rate down Reply
budwsr25

I think you can only put toys and electronics in layaway at walmart.

September 27 2011 at 12:32 AM Report abuse +1 rate up rate down Reply
LiLMan78

Correction sorry it Starts Oct 17th til Dec 16th

September 26 2011 at 11:50 PM Report abuse +1 rate up rate down Reply
LiLMan78

Well Guys here you go if you were wondering when the layaway returns to walmart ..... BUT there have are now new stipulations on what can be put on layaway now ..its only applies to Toys and electronics only that cost $15.00 or more and Starts Oct 15 and Ends Dec ....Unless they decided to revise their current plans.... but heres the link for those who of you that would like futher information on it ..... Hope this helps ..http://www.fool.com/investing/general/2011/09/09/wal-mart-hopes-to-amp-up-spending-with-layaway.aspx

September 26 2011 at 11:45 PM Report abuse +1 rate up rate down Reply