Have you tried using layaway buying recently? Layaway buying is not new, it’s an option that has been around for years. This type of funding has helped many households who have limited funds to buy merchandise immediately and have it stored away.  On a layaway purchase,  you put some money down now and will pay off the balance in small installments. After the item is  paid in full the company releases the “hold feature” and the customer takes the merchandise home.

It’s a very simple purchase transaction that works for the customer and for the company. The customer knows that they have the merchandise on hold ( the right size and color) and the company receives a partial payment on the merchandise for providing this service.

Years ago I couldn’t dare talk this negative about the layaway process to my parents as many of the things that I was able to obtain in my youth came from a layaway plan.  At that time, the parents that participated in this purchase arrangement would have slapped me for being so rude about the layaway program. They would be angry at me because  buying on layaway was the only option they had at that time and it was a much-needed  program for families who didn’t have a lot of money.

However, that is my point today, that was many years ago when I was in my youth.  People have since changed their shopping habits significantly from the older days. The mental attitude of today’s consumer is different and buying something on layaway is not like it was years ago. Some companies are still trying to use this policy but it’s no longer has the same impact.

Today, it requires you to be willing to wait to receive your merchandise at a later date and today’s generation is not in favor of that.  It is because of the attitude that “I must have it now”  is why I’m saying that this process no longer works for the new generation.

There are many factors why layaway purchasing has lost its appeal in today’s marketplace.

First, the styles of clothing and electronic gadgets are changing so much faster today as some fashions are hot now and within a few months, no one wants them any longer. So if you buy something on layaway by the time you finish paying for the merchandise, the child no longer wants it.

Second, there is so much competition being done in duplicating a merchandise by foreign companies  that there is an over abundance of the item that you had purchased in local stores.  So when you go back to pay your layaway bill, there are discount stores that are selling the same merchandise at a cheaper price. Consequently, people are starting to buy the item from the discount store instead of going back to pick up the item from layaway.  This activity is causing money problems for these stores as the layaway inventory builds up because their items are not being picked up like they did before.

Third, the layaway stores are receiving a partial payment of the merchandise upfront but it’s not enough to cover the carrying cost that is associated with keeping the merchandise on hold. I won’t be surprised if these companies will be revising their layaway policies. They may start charging a layaway surcharge fee and reducing the pickup dates to speed up the payment process.  If the consumer fails to pay off the merchandise within a specified date, the item will be placed back into regular inventory for sale to another customer.

Fourth, this is a part of the financing process that many of you don’t know about. The store that is sponsoring the layaway financing, they often have to come to Wall Street to borrow funds to pay for their merchandise.  And when they do, they pay a fee to the Wall Street firm for lending these funds.  So when their layaway inventories don’t move as fast as they have projected, this causes a loss in revenue as the  cost of carrying this unsold inventory is very expensive.

It is because of these financing factors that hurt the bottom line that I don’t believe that the layaway program will continue to work in today’s economy. Another point that has to be considered is that the trend is for stores  want  you to use their credit cards in place of using a layaway plan. If you do so,  they will be able to get another source of income from you by having these the high-interest credit cards outstanding.

So if you have any items currently on layaway, I strongly suggest that you make plans to pick them up sooner than later. Plus, theses stores will be changing their policies on this process within a matter of time, just wait. In other words, competition is very strong in the retail market as everyone is offering lower prices. The largest store in the country Walmart, which have expanded so fast in the past ten years, they have a layaway policy as well. But I don’t believe that they will continue to do so if the carrying cost of their hold inventory keeps climbing as fewer people are coming back to pick up their layaway merchandise.

In closing, the layaway financing model is a temporary marketing idea that I believe will eventually be phased out. The financing cost carrying the inventory is one point, but the fact that today’s generation don’t want the item when you pick it up later is also an important indicator as well.  For those who want to continue to use the layaway program, you can still do so while you can,  but it won’t be around too much longer for the reasons noted above. So if you know someone who relies on the layaway policy, pass this information onto them as a helpful tip.