smart spending

Layaway makes a comeback

Snyder says layaway gives Kmart a leg up on the competition.

"It's not an easy thing to mobilize against, with the inventory, management and administration," he says. "There are a lot of moving parts to doing a layaway operation very well."

21st century layaway

In the age of the Internet, layaway may be getting a second life in the form of a new technology-driven business model known as "e-layaway."

When Sergio Pinon saw merchants like Walmart abandon layaway, he recognized an opportunity to use technology to reinvent the unwieldy beast. The result is, the Florida-based company he founded.

"We met a lot of companies, both large and small, that were managing their layaways on index cards, no Quickbooks or anything," says Pinon, who also serves as chief marketing officer. "There were no tools available for them, so we kind of took that ball and ran with it."

E-layaway simplifies layaway for both merchant and consumer by removing the costly, time-consuming storage and bookkeeping processes. Layaways remain at the distribution center during the layaway period instead of taking up valuable warehouse space.

Payments are automatically deducted from the customer's bank account. Customers set the contract period, from three to 13 months, and can adjust their payments online. is just one of several new vendors battling to become the "eBay of layaway." Pinon says the e-layaway system helps retailers tap into a new pool of consumers.

"This is a large part of a consumer base that merchants in the past have been unable to reach online because they don't have credit cards or any form of payment," Pinon says. "Now, people who have been unbankable or uncreditworthy for years have a way to transact with merchants. We open up a huge market for them."

And the big nationals are listening. Best Buy, Home Depot and the Apple Store are just a few of the retailers using e-layaway. Even Kmart and Sears are boarding the e-layaway train, albeit without abandoning their legacy in-store layaway programs.

Davidowitz sees e-potential for retail.

"With everything bad that is happening to consumers, it may very well be that e-layaway will take off as a form of credit," he says. "For the merchant, the economics appear to make more sense.

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