Layaway made a big retail comeback in 2011, with stores such as Sears, Walmart, and Kmart encouraging customers to take advantage of this retro purchase technique. Walmart discontinued layaway in 2006 but brought it back in 2011 for fine jewelry, toys, and electronics. Sears and Kmart offer online layaway plans; Walmart’s plan is physical store only. Once consigned to the working class, layaway is now an accepted alternative payment for those who have maxed out credit cards, had to declare bankruptcy, or simply do not want to use high-interest credit cards.
ConsumerSearch.com, an online aggregator of product reviews, conducted a survey of 1,011 consumers — as assembled by Research Now, a survey firm — in September 2011 about their attitudes towards layaway. The findings are as follows.
- Forty six percent of respondents have purchased an item using layaway in their lifetime, either in a physical store or online. Ninety-six percent of these respondents were completely or mostly satisfied with the experience.
- Income does not appear to be a factor in usage of layaway. Consumers with household incomes under and above $40,000 reported previous use of layaway at an equal rate and are almost equally open to using layaway services in the next six months.
- The most common items for layaway purchase are big-ticket items, with furniture (47 percent) and large appliances (46 percent) the most popular. The third most frequent layaway purchase is holiday gifts (42 percent).
If you are a small online merchant, a layaway option could attract customers who do not use credit cards. But you don’t have to handle the administration yourself. At least one online company, eLayaway.com, integrates its system with online merchants.
eLayaway.com allows merchants to offer layaway to their customers in two different ways. The first is through an affiliate program in which merchants and manufacturers have their products placed in an online mall on the eLayaway website. The Apple Store, Best Buy, the Disney stores, PCMall, Diamond.com, and eBags are some of the merchants in the mall.
The second way merchants can participate is to integrate the eLayaway service into their shopping cart software. These merchants are not included in the mall on the eLayaway website.
How eLayaway Works
Consumers who purchase directly from eLayaway must first register on the website. Basic membership is free but for a fee of $8.95 a month, consumers can buy a premium membership that helps improve a credit score. Membership also eliminates paying transaction fees, which non-members pay at a flat 1.9 percent to 3.9 percent on the entire eLayaway order.
For members and non-members, the monthly payment is automatically deducted from the customer’s bank account each month. Purchases can be spread over a 3 to 13 month period and eLayaway provides a calculator to help consumers decide on a manageable payment term. Consumers receive the merchandise directly from the merchant once the full amount has been paid. Whether there is a shipping charge is up to each merchant. Consumers that cancel the layaway are charged a $25 fee.
The company charges participating merchants a monthly service fee of $9.99. This monthly fee includes listing in the eLayaway Merchant Network, listing in an exclusive search engine, and free eLayaway order processing per month for the first $2,000 in sales. Those merchants doing between $2,001 and $10,000 pay a $20 monthly fee and those transacting between $10,001 and $50,000 pay a $70 monthly fee in addition to the $9.99. In some cases eLayaway receives a commission on sales as part of merchants’ affiliate programs. Participating merchants receive funds from eLayaway via ACH bank payments after the consumer makes the final payment.
Integration with Shopping Carts
For merchants who want to offer layaway plans directly on their shopping carts, eLayaway is integrated with the following platforms:
It offers several other integration methods, including on individual product pages and in the payment checkout.
Over the past few months eLayaway’s average layaway amount for retail products has been $440 and consumers take between four and five months to pay off their purchases. Sergio Pinon, eLayaway’s CEO, says that the customer base is across all ages.
Fifty-nine percent of eLayaway’s customers are female, and 35 percent are between the ages of 18 and 34. While 22 percent of members have a household income of less than $30,000, and 29 percent earn between $30,000 and $60,000, a surprising 22 percent report a household income of over $100,000.
Advantages and Disadvantages for Customers
The main advantage is that customers can purchase items they might not otherwise to be able to afford. Another is that they do not have to pay interest as they would with credit cards.
The biggest disadvantage is that customers have to start payments several months in advance in order to get merchandise in time for gift giving. In some cases they are not able to take advantage of discounting that occurs closer to holidays. eLayaway leaves the decision about offering the discount to a layaway customer to the merchant, but CEO Pinon recommends that merchants refund the difference. Another option is a merchant gift card for the consumer in the amount of the discount.
Online layaway allows online merchants to reach customers who cannot pay with credit cards and cannot pay in one lump sum. For consumers, it provides an interest free purchase — spread out over several months — letting them make purchases they might otherwise be unable to afford.