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Layaway: Boon or Burden?

I recently came across an article on MSN Money about how layaway is making a comeback in these difficult times. This instantly reminded me of something very valuable I learned while working retail many years ago about layaway programs.

Now I share the secret with you: layaway is nothing more than a storage program. It only works to your benefit if you keep up the payments and retrieve your merchandise by the due date. Otherwise, you’re paying to store the retailer’s merchandise in a back room for a specified period of time and with specified payments. This is exactly what you do when you put things in a storage unit.

If you end up not making your due date for payoff and pickup (and as many as 2/3 of us don’t), the money you’ve been paying all along the way simply goes into the retailer’s pocket—that’s money YOU’VE lost! Now the retailer gets to return the merchandise to stock, mark it down if need be to match prices with existing remaining stock, and laugh all the way to the bank. You’ve pre-paid his “losses” on the new sale price. Now this merchandise will sell much faster because it’s now marked down, insuring less future loss.

Before you go rushing to your local layaway retailer, sit down and do the following so you’re prepared:

1) Get all information about the terms and agreement on the layaway program itself before signing anything and laying anything away. Most programs won't let you put away merchandise already marked down, but some will take markdowns of items in layaway when they go on sale, and credit the difference to your layaway balance.

2) Realize that you’re putting away merchandise at FULL PRICE, when you will have an opportunity to purchase it at a discount later on if it returns to stock—whether YOU lay it away or someone else does.

3) Ask yourself if you’d rather have the merchandise NOW (or on your program’s end date) or if you can wait a little while for it to go on sale or clearance. Is the potential discount worth the wait, and how would it compare to the potential loss of a failed layaway scheme and no merchandise at all?

Like me, I believe you’ll most likely take the “wait for the discount” choice. I learned about this after having to help clean out a Christmas layaway storage room one year, and taking all the clothing from it back to my department to mark down to current prices. After looking up and marking down clothing that was never picked up from layaway, I asked my manager why people do this if they never intend to pick it up. He told me, “I don’t care why they do it—just that they KEEP doing it. This is a good money-maker!”

Can YOU afford such a loss in times like these? Don’t fall for this marketing trap.

Posted by Cute at 4:54 AM

Labels: economy, financial (non-tax)