In tough times, layaway plans make a comeback

Chang is a Times staff writer.

Qiana Zimmerle got an early start on her Christmas shopping last week, heading to a Kmart in Burbank where she loaded up a cart with toys, clothes and a High School Musical game.

But with money tight this year, instead of going to the checkout line, Zimmerle dropped the gifts off at the layaway counter, paid a small deposit and left the store -- for now. Over the next few weeks, she’ll make regular payments on the remaining $113.18 balance and pick up the items when she’s paid it off.

“I have 12 nieces and nephews, so that’s why I have to do it this way,” said Zimmerle, 28, who lives in Eagle Rock. “It’s easier on me, money-wise.”


After pulling back on layaway programs for years, retailers are again touting the service as a financially savvy way to buy goods this holiday season. Cash-poor and credit-strapped shoppers are responding by flocking to layaway counters at stores such as Kmart, Marshalls and Burlington Coat Factory, and using online options such as

“The response has just been tremendous,” said Tom Aiello, a spokesman at Kmart, which is running a national holiday ad campaign to hype its longtime layaway service. “We know for a fact that it’s a big increase over the usage from last year.”

Retailers are hoping the availability of layaway will boost customer traffic during the coming weeks.

“The expectation on all retailers is that this is going to be an extremely tough holiday season,” said Richard Giss, a retail analyst with accounting firm Deloitte & Touche. “So they’re reaching into the old retail bag of tricks. How do you get people to spend money when they can’t afford it? You help them budget, you help them plan -- that’s really what a layaway plan is at its core.”

Unlike credit cards, layaway plans usually carry no interest. Most stores require a small deposit or flat fee upfront and place some restrictions on what can be put on layaway, such as perishables and clearance items. A typical layaway term is 30 to 60 days, Giss said.

Layaway programs rose to popularity during the Great Depression and became a common form of payment for consumers who couldn’t afford to pay cash upfront. But once credit cards became widely available layaway all but disappeared, with the exception of a handful of retailers.


Now layaway is making a big comeback. Thanks to the credit crunch, the buy-now-pay-later mentality of credit cards has been replaced by frugal consumer spending and an unwillingness to take on more debt.

“People are looking to buy the things they want with non-credit-based terms,” said Michael Bilello, senior vice president of business development at “The lend-and-spend boom is over.”

Bilello said, a 3-year-old payment processing service affiliated with more than 1,000 merchants including Gap and Adidas, has seen a sharp rise in business from both consumers and retailers. The company’s membership has risen to 75,000 registered shoppers today from 10,000 in January, Bilello said.

“Big-box retailers are now contacting us and saying, ‘We want to offer layaway terms to our consumers,’ ” he said.

Leticia Castaneda of Glendale said seeing Kmart’s layaway commercial on television sold her on the service.

“I heard . . . there was a layaway department, so I came,” said Castaneda, 45, as she placed about $500 worth of Christmas presents on layaway at the Kmart in Burbank last week. “Instead of paying three, four hundred bucks at once, I take my time,” she said. “It makes it easier on the Christmas shopping.”


Wal-Mart Stores Inc. made headlines two years ago when it announced it would drop its layaway program. Despite the recent resurgence in the service, the country’s biggest retailer said it wouldn’t reverse the decision.

“Right now there are no plans to bring back layaway,” Wal-Mart spokeswoman Anna Taylor said. “Traditional layaway programs are expensive, and ultimately that cost is factored into the cost of products, which affects the customers.”

And the availability of layaway programs hasn’t helped some businesses.

Nancy Maher, who owns a jewelry stand in downtown Los Angeles, said that despite offering a flexible layaway plan that doesn’t include a set deposit amount or fixed payment dates, she has had fewer customers lately and has seen layaway use drop 50% over last year.

“When the economy is down, jewelry is a luxury,” Maher said. “It you have some money, first you eat, then you buy clothes. Jewelry is the last thing people buy.”

But for the essentials and less pricey gifts, layaway could be the answer to many consumers’ financial troubles this year.

Zimmerle, the Kmart shopper, said she faced higher prices for groceries and rent in recent months and was worried that the company where she worked as a payroll account coordinator might go out of business.


Without layaway, she said, “I’d have to do the Secret Santa thing,” picking one of her relatives at random and buying a gift only for that person.

Even the 99 Cents Only Stores chain, which sells all of its products for less than a dollar, unveiled its own layaway program last week.

“I think it’s probably a real sign of the times,” said Eric Schiffer, chief executive of City of Commerce-based 99 Cents Only. “We just feel it’s a service we want to offer our customers.”

“If there’s a big bottle of spaghetti sauce and they can put a quarter down, pay a nickel each week and pay it off by Christmas, it’s theirs.”