Sears Re-Launches Layaway Service to Meet Demand

(MoneyWatch)  Retailers are dusting off their history books to determine how best to handle the downturn, and many are employing a few strategies from the Great Depression -- and adding a modern twist.

Layaway, the payment plan that became commonplace in the '30s during the Depression, has become so popular lately that companies who did away with the service are eagerly re-instituting it. Layaway allows customers to request that stores put items aside for them until the merchandise is paid for in full. Sears Holding Corp. is bringing layaway back to its namesake stores almost 20 years after it was canceled. "Going into the holiday season with the economic uncertainties we all face, we just wanted to be very mindful and attentive and help support our customers," says Sears Chief Marketing Officer Don Hamblen. Sears brought back the service several weeks after its bargain chain, Kmart, began promoting layaway as part of a national marketing campaign. Executives who have thus far declined to release specific figures called Kmart's results "tremendous," according to The Associated Press. A handful of additional brick-and-mortar retailers, including TJ Maxx, Marshalls, and Burlington Coat Factory, report that demand for layaway is especially strong this year.

But like many old-school practices, layaway services have evolved to fit the Web, and eLayaway LLC is reaping the benefits. The Florida-based company provides a system that lets customers pay for products in monthly installments through direct debits from their checking accounts. Online retailers can offer eLayaway as a payment option for increasingly frugal consumers. More than 1,000 online merchants now use eLayaway, which recently rolled out an online shopping mall bearing the tag line "Where smart people shop, and smart shoppers buy."

I talked with Maggie Gilliam of the research and business advisory firm Gilliam & Co. for some insight on how layaway services will help floundering retailers.

"Layaway is definitely coming back," she said, noting that not all retailers have embraced its new-found popularity: Wal-Mart discontinued the practice in 2006. "Still, layaway is a good recession tactic -- it's just pretty small at this stage of the game."

Another classic retail strategy is highlighting a store's less expensive merchandise -- the items that are considered quick pick-me-ups. Leonard Lauder, former CEO of Estee Lauder Companies, coined the term "lipstick index" to describe a pattern he noticed: Whenever the economy was down, lipstick sales were up. He saw that consumers enjoyed inexpensive indulgences during trying times, but in this recession, women aren't buying cosmetics to feel good: they're buying hosiery. This modern twist is attributed to the recent presence of tights on fashion runways, and retailers say they've seen hosiery sales skyrocket. "You don't have to invest in a whole new wardrobe," says Dan Sackrowitz of the Internet retailer Barenecessities.com, a site that's seen its hosiery sales increase 60 percent in September and 70 percent in October. At about $15 a pair, tights cost the same as a nice lipstick.