Retailers try to lure shoppers with layaways

The holiday shopping season begins with a rush next week, when millions of shoppers descend on stores and malls for day-after-Thanksgiving Black Friday sales.

CBS News correspondent Tony Guida reports that shoppers say they worried about over-extending themselves in these tough times, but retailers are ready for them with an old favorite.

The layaway is back.

Born in the Great Depression when people had little spending money and no credit, layaway is tonic for today's great recession.

Retailers, fearing empty aisles, are turning to an old gimmick to rev up holiday sales.

"It shows that retailers are desperate to get people to spend money when they don't have much money," says Jack Otter, executive editor of CBS Moneywatch.

The Myles family, for instance, is buying bikes for the kids on layaway at a New Jersey Toys-r-us, saying they're doing so because layaways let you "not overextending yourself."

Walmart - the nation's largest retailer - revived layaway for electronics and toys a month ago. It's been a big hit.

"We're getting new customers. We're getting great layaway purchases," says Laura Phillips, senior vice president for Toys and Seasonal Merchandising at Walmart.

It's been so successful that a major Walmart competitor - Target - this week admitted "Walmart's layaway program has certainly hurt us in November."

Jack Otter warns, however: "People need to be aware that layaway is not free.

Layaway is a deferred purchase plan requiring at least 10-percent down and a $5 service fee. Installments are spread out over 2 months, usually, and should the customer not complete the purchase, there's a cancellation fee.

"In the end a consumer will spend more money using layaway than if they just bought the item outright," Otter says.

But when they can't buy the item outright, shoppers appreciate layaway. It's easier to spread out the payments and not face any troublesome bills on December 26th.