Sears Follows Kmart’s Lead on Layaways
There hasn’t
been a lot that has gone right at Kmart in recent years, but its decision
to continue offering layaway appears to have been the right decision in
light of the current financial challenges facing American consumers.
It also appears
that Sears, Kmart’s sister-company, also thinks the time is right for layaway
now that the department store chain has announced it would resurrect its
program nearly two decades after getting out of it. Sears’ new layaway
program will go into effect this Sunday and will cover all merchandise
sold in the retailer’s stores.
"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," Don
Hamblen, chief marketing officer at Sears, told The Associated Press.
George
Rosenbaum, chairman of Leo J. Shapiro and Associates, believes offering
layaway will benefit Sears.
"This is a tool that people are going to use quite heavily this Christmas
in those stores that have it available. And then retailers will see whether
this was a great thing they missed and whether they should install it next
year," he said.
Discussion Questions:
Will bringing back layaway help or hurt Sears for the Christmas selling
season and beyond? Do you see other large retail chains following the
lead of Kmart and Sears on layaway programs?
These are two under-performing retailers trying desperatly to be relevant. It’s worth noting that few other retailers have followed their lead. I agree that whatever business this might attract will probably be with customers who are more likely to default on their purchases.
Walmart has a loyal clientele and many occasional shoppers. Those occasional shoppers are probably shopping more at Walmart during these difficult economic times. Walmart eliminated layaway because it was not worth the trouble but they have a large loyal base of consumers. Kmart does not have a large base of loyal shoppers. Layaway is certainly an opportunity to keep their current consumers coming back and to draw in more consumers who are pinched for cash. While this may not be convenient for Kmart, it is a good strategy for getting consumers in the door.
How well Kmart meets their needs with the right products, right prices, and right service will determine whether those consumers stay with Kmart. But layaway is getting them in the door to “try” Kmart again.
It is clear that major market share shifts are going to take place over the next several years, but more immediately over the next several months.
Walmart announced 3 percent comp store increases for the month of October in an environment where retail sales are trending down significantly. This is significant volume and it is coming out of other retailers’ registers.
Kmart and Sears have been battling for their life for several years and they will need to be as creative as possible to try and remain relevant. This is certainly one way…the credit market hasn’t been kind to middle and lower income wage earners and this is one way to help this segment.
I know the nay-sayers see this as a gimmick, but if timed right, these techniques can prove to work. I still believe that Walmart will come out with some kind of an answer to the issue of tightened credit for their customers.
I do believe that we will see additional “lay away” kinds of concepts being touted by retailers as they look for ways to keep their market share.
Layaway is an appropriate response to documented changes in consumer credit card practices. However, it may be too late to have the full impact it could have. The Kmart program was divided into 8 payments. There are JUST 8 payment weeks left between now and Christmas. This tactic should have been put in place as soon as the facts about credit evaporation and raised interest rates became public knowledge.
I have not yet read the details. Hopefully the lack of price protection in the Kmart policy has been resolved in the Sears approach. One price adjustment within 7 days of putting an item into layaway is counter productive to a true desire to assist the consumer.
Sears has the advantage of watching Kmart closely and attempting to duplicate the things they do right.
There is an opportunity to teach today’s youth how important layaways can be. Keep in mind that younger shoppers don’t really understand layaways.
Smart retailers will use email and text messages to remind the shoppers that they goods are still awaiting their return, and hopeful purchase.
Layaway may be a timely tactic for Sears, just as it was for Kmart, as I commented a couple of weeks ago. But Sears’ success or failure still comes down to some things they haven’t gotten right for years. What is the relevance of the merchandise content? What is the condition of the stores? What is the brand positioning compared to its rivals? Until Sears can answer these questions successfully–which may not happen–layaway is just a band-aid.
A layaway program will help Sears over this holiday season, but it may not have marked impact in the long term. A retail gimmick can provide short term sales lift, but if the retailer does not back up the tactic with good selection, great customer service and a true commitment to serve consumers, the aura of the tactic will soon wear off. Right now, Sears just has the gimmick.
Layaway is a definite alternative to the credit-crunched consumer. Many have lost homes and/or have no more credit, so layaway gives them a good alternative. It drives earlier sales for the retailer as well. I agree, the ability to offer layaway is one thing but the need to be efficient and have a good locator system and a quick and easy payment method is so very important.
Other retailers will likely follow suit.
I think this is more about the press release than an actual tool that will help sales. Why use layaway when it’s just as easy to pull out your Visa and avoid another trip back to the store? Most likely, many of those items on layaway will gather dust and go unclaimed. If a customer doesn’t have the cash or credit, the customer most likely doesn’t have the wherewithal to understand how layaway works. My personal opinion is that it will have no meaningful contribution to sales. If anything, it only gives Sears/Kmart the ambiance of a pay-day loan store. Another reason not to shop there.
Layaway is a good way for retailers to add another ‘credit’ option to their customers. My only concern is the management of the layaway room. So far, every retailer that I have interacted with that has a layaway program has real challenges maintaining the layaway system and physical inventory. Layaway storage areas are messy and hold dates are not consistently observed. At minimum, layaway should not be allowed on high velocity products.
Ultimately, we are here to sell, not store (I have touched on this on an earlier post this week). A well-managed layaway program can be a boon for customers but let it slip, and it becomes the store manager’s headache.
I suspect Sears is doing this because they have seen some positive response at Kmart. But the long-term success of layaway is beyond my comprehension. From a consumer’s point of view, I imagine the utilization of layaway is because the credit card lines are full and the shopper doesn’t have enough money at one time to buy a bigger ticket item. Now the shopper has to make multiple trips to the store to make a cash payment? What happens when the shopper falls behind in their planned payment schedule? Is the gift now spending Christmas in the retailer’s back room rather than under the tree?
For the retailer, holding merchandise in the back room versus on the shelf is contrary to all best practice principles. What happens at Sears when they have a dozen of the most in-demand toys sitting in the store room while empty shelf is driving customers to other stores?
My prediction is that Kmart assumed early success will lead to disaster as we get closer and closer to the year-end holidays.