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Layaway Making A Comeback With Shoppers

A payment method that became decidedly passe in the 1980s is being promoted again this holiday season as a way for budget-conscious shoppers to buy gifts without breaking the bank.

Layaway - the practice that allows people to pay for everything from tools to televisions bit by bit before taking their items home - is back in advertisements for the first time in years for discount chain Kmart.

In a national campaign launched last week, the ads proclaim "beat the rush and pay the easy way with Kmart layaway." They mark the first time many shoppers have even heard the phrase, even though the chain has offered the option for decades.

"In the backdrop of this economy, it all of a sudden has a great deal of relevance," said Tom Aiello, a spokesman for the Hoffman Estates-based subsidiary of Sears Holdings Corp.

Lisa Rohlic's husband lost his job last month and now she's using layaway to purchase necessities without using credit cards, reports CBS News correspondent Kelly Wallace.

"It allows us to buy the bigger ticket items and pay them off a little at a time in smaller amounts," she said.

Discounter Burlington Coat Factory Warehouse Corp. - one of the few remaining national chains offering the option - saw its percentage of layaway sales grow from 4.6 percent in August to 5.3 percent last month.

But even as consumers worried about personal finances and diminishing credit limits may show a renewed interest in layaway, experts say the practice - which accounts for a fraction of overall sales and has been a dwindling segment - likely won't make a full-fledged return to stores any time soon.

"I don't think it's a trend that will continue to grow," said Kathy Grannis, a spokeswoman for the National Retail Federation. "Consumers would much rather have the merchandise with them and make payments on it while they own it, instead of having something sit at the store that they can't have right away."

Layaway, which has its roots in the Great Depression, was largely eclipsed in the past two decades as economic prosperity grew and consumers began lining their wallets with credit cards. One of the last large holdouts, Wal-Mart Stores Inc., discontinued the practice in 2006, citing falling demand and rising costs, leaving a smattering of discount chains, independent retailers and Web sites to offer the option.

TJX Cos. offers layaway in some of its Marshalls and TJ Maxx stores and nearly all of its A.J. Wright locations, but said it couldn't say whether it plans to expand the payment option or whether it expects layaway sales to climb this quarter.

Wal-Mart spokeswoman Linda Blakley said the company has no plans to bring back layaway, which it said can mean higher prices for customers.

George Rosenbaum, chairman of retail consulting firm Leo J. Shapiro and Associates, said retailers that offer layaway may find themselves with a jump on the competition during the make-or-break fourth quarter, which is already generating dismal predictions.

That's because shoppers who buy items on layaway make the initial purchase weeks before they take goods home, locking sales statistics in early. In Kmart's case, shoppers pay a $5 fee and put 10 percent down, while making payments over an eight-week period.

"Retailers have a stake in getting the Christmas season started as early as possible," Rosenbaum said. "For households that don't have the money to start it, but can hold merchandise for a dollar or two, this is a very sound approach."

Michael Bilello, a spokesman for e-Layaway.com which offers online layaway services for more than 1,000 merchants, said interest in the practice is soaring, especially among middle-income shoppers who might have eschewed it before.

"There's really nothing sexy about walking away from a layaway counter," he told CBS News. "But doing it in the privacy of your home through e-Layaway certainly has caught on with a lot of consumers."

But Michael Dart, a retail strategist and leader of private equity practice for consulting firm Kurt Salmon Associates, said some shoppers might instead bank on the idea that deep discounts will be available closer to Christmas.

"There could be more of a disincentive this holiday season than at almost any other time," he said.

Edgar Dworsky, editor of the Internet consumer resource guide Consumerworld.org, said layaway teaches good lessons about patience and caution to shoppers. But he doesn't expect it to gain much traction with today's consumer.

"Layaway really was a great deal and kind of a way to force people to budget their money," he said. "People don't have the discipline to do that today."

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