Racing to the Bottom: These Holiday Sales Schemes are Heating Up

With consumer spending accounting for 60-70 percent of a weak economy, retailers are serving up layaway and payment plans earlier and cheaper than ever.

Wal-Mart (NYSE:WMT) is bringing back layaway in mid-September this year, a month earlier than last year, and dropping the fee from $15 to $5, and refunding the $5 after final payment on a gift card. Wal-Mart layaway is being offered between September 16 and December 14 with an expanded list of eligible products. Wal-Mart Chief Merchandising and Marketing Officer Duncan Mac Naughton says the changes are “even more attractive to our customers and makes Wal-Mart more competitive in the marketplace.”

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Wal-Mart competes against other mass merchandise retailers like Toys R Us, Target (NYSE:TGT), Sears Holdings Corporation (NASDAQ:SHLD), and Costco (NASDAQ:COST), most of which offer layaway programs as well. Target Merchandising Chief Kathee Tesija has admitted that last year “Wal-Mart’s layaway certainly hurt us in November.” It’s no surprise that Wal-Mart wants to sign people on before the competition.

Sears’ Kmart unit offers layaway for a nonrefundable $5, but offers a 5 percent discount on layaway purchases. More interestingly, Kmart is offering the service for the back-to-school season, something Wal-Mart did not do. Sears has also announced that it would offer layaway services on vacation packages. The effectiveness of this strategy remains to be seen.

Best Buy (NYSE:BBY) offers layaway for 25 percent down and a 5 percent nonrefundable fee for purchases more than $250. The TJX Companies (NYSE:TJX) also offer layaway at their TJ Maxx and Marshall’s outlets for a $10 deposit.

With layaway offerings growing in popularity, merchandise retailers are fighting to be the first to get budget shoppers signed up. With Wal-Mart entering the game so early and competing across the board, other retailers may need to change their strategy to avoid losing sales.

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