It’s never too early for retailers to start battling it out for holiday shoppers. This year, an especially early competition concerns layaway. Despite the fact that Labor Day weekend just ended, the kids are barely back in school, and most people haven’t even begun thinking about Halloween let alone Christmas, major retailers have already introduced special layaway programs meant to entice consumers into making holiday purchases now.
Walmart recently announced its layaway options would be expanded and tweaked for the winter holiday season—a season that, apparently, has already begun and now lasts for around four months.
In 2011, Walmart reintroduced layaway for the holidays, after abandoning layaway as an option in 2006. While last year’s layaway program began on October 17, the 2012 edition is being stretch an additional month. Walmart shoppers will be able to electronics and toy purchases of at least $50 on layaway starting September 16, 2012.
The fee structure has also been changed this year. In 2011, there was a $5 fee to buy something on layaway, and a $10 fee if the customer cancelled. This year, Walmart at first introduced what it is calling an “open fee” of $15. If the customer cancels, Walmart keeps the money. If the transaction is completed, the shopper gets the money back—but only via a Walmart gift card, not cash. Soon after Toys R Us introduced its layaway program, though, Walmart reduced its layaway fee from $15 to $5 — and it’ll still be given back to consumers in the form of a gift card when the layaway purchase is completed.
This week, Toys R Us introduced its own new layaway program, which expands the holiday shopping season—as well as the retailer battles for holiday shoppers—even further. What sets Toys R Us layaway apart is that it is available to shoppers right now, and that it is available with no service fees for shoppers who place items on layaway by October 31. There is no minimum purchase price.
To put items on layaway with Toys R Us, the consumer must put at least 20% down, pay off at least 50% within 45 days, and pay in full by December 16. Layaway will be possible for shoppers after October 31, but then the service requires a $5 nonrefundable service fee.
Layaway is promoted as a helpful service for consumers who want to ensure they get just the right items to place under the Christmas tree, while avoiding the possibility of ending up in deep credit card debt. But let’s not pretend for a second that stores are pushing layaway and the idea of buying holiday presents in September because they’re looking out for their customers’ finances.
Christmas merchandise arrives in stores in September because the longer the holiday season, the more likely it is that consumers will go overboard with holiday season shopping. Few shoppers have the willpower to start and end their holiday shopping in September or October, no matter how much merchandise they’ve already accumulated. So retailers hope to woo shoppers in with special promotions in the “preseason” before Halloween, then again with “early Black Friday” sales through November, and finally with the onslaught of Black Friday, Cyber Monday, and the rest of what’s traditionally been peak holiday shopping season. (All of which is followed by after-Christmas and New Year’s sales and promotions, of course.)
The strategy of Walmart’s “open fee” with its new layaway program is an obvious ploy to force customers back into the store, where they’re likely to be confronted by an all-new range of holiday shopping temptations.
Rather than pocketing the fee, Walmart comes off as a good guy by “giving” the fee back in the form of a gift card. A gift card giveaway like this is a win-win for retailers: The store wins either because the gift card is never used—a staggering amount go unused—or because they are used when the customer returns to a Walmart on a shopping excursion that’s likely to involve spending above and beyond the value of the gift card.