Christmas Starts Early For Wal-Mart Stores Inc.

Up until a few years ago, layaway seemed to be a relic of retail history. With so many consumers using bank or store credit cards, the demand for partial payment plans had fallen.

However, the recession combined with a difficult economic recovery meant that many consumers no longer had access to large lines of personal credit. Retailers realized, however, that consumers still wanted to be able to spread out payments for large holiday purchases.

In response to this demand, retailers not only reinstituted layaway plans but started offering more flexible terms to cash-strapped customers.

In 2011, Wal-Mart Stores Inc. began to once again offer layaway to customers, a move that turned out to be an enormous success. So much so that in 2012, the industry saw a rise in “layaway wars,” with retailers competing to offer low or no fees, reduced minimum purchase requirements and additional time to pay off purchases.

Interestingly, even as the recovery continues, layaway has remained a popular choice with both consumers and credit and debt specialists. For many people, layaway is a sensible alternative to buying items on credit: There are few or no fees, no interest to pay and there is no risk to a consumer’s credit if he or she is unable to pay off their holiday purchases.

Retailers have continued to enhance layaway programs each year around holiday time.

“In the five years we’ve been offering this holiday layaway program, we’ve discovered that customers use it for a whole host of reasons, from being able to better budget their money and avoiding credit card fees,” Anne Marie Kehoe, Walmart’s vice president of toys, recently told the Reuters news organization.

This year, Walmart combined the opening of its layaway program with its inaugural “Toy Week.” Starting Aug. 28, shoppers could begin selecting layaway purchases at even more favorable terms than what Walmart has offered in previous years.

Walmart, according to Reuters, is going to expand eligible layaway items by one-fifth, allowing consumers to choose from over 40,000 items that can be purchased through a layaway account.

Other changes include a reduction in minimum pricing for layaway purchases. The total cost of all items in a layaway order must be $50. However, Walmart has made a change to the minimum price for individual products that are a part of that order.

Previously, an item had to be $15 or more to qualify for layaway. Now items only need to cost $10. Finally, layaway participants will be able to spread their payments over 90 days rather than 60.

What attracted the most media attention, however, is that the layaway program began a full two weeks early this year. The announcement of early layaway coincided with the news about “Force Friday,” the debut of a line of toys inspired by the release of “Star Wars: The Force Awakens.”

The film’s scheduled release is in mid-December, and kids will be excited about receiving Star Wars toys under the tree. By providing the layaway option early, when parents can be assured of getting the exact toys their children want, Walmart has helped to ensure that its customers will have a Merry Christmas.

There are two things to look at when considering Walmart’s decision to open layaway early. The first is the company’s ongoing commitment to assisting its customers with their short- and long-term financial needs. Walmart has always worked hard to provide everyday low prices to its shoppers. But over the past several years, Walmart has offered a variety of financial products that meet the needs of thrifty consumers.

These products include prepaid debit cards and cellphone service, along with low-fee checking accounts that are easy to qualify for. Walmart’s omnichannel payment options even include allowing customers to order items online and then pay for them in the store.

An expanded layaway program is an appropriate option for shoppers who may not have credit cards or the kind of cash flow that allows them to afford a one-time holiday shopping spree.

But while Walmart is very in tune with its customer’s financial needs and shopping preferences, analysts have also noted that offering early layaway may well help the retailer ensure a successful holiday shopping season. Recent second-quarter earnings created a lot of media buzz, with some analysts becoming very critical of Walmart’s performance. While many analysts also argued that Walmart is in a state of transition, which is going to reduce earnings in the short term, it is also clear that Walmart is eager for sales.

 In fact, it may well be that Walmart is looking to popular holiday toys as a way to boost the bottom line and reassert itself as a retail powerhouse. Why? Toys are big business, particularly during the holiday season, and even more particularly when they share a brand with a popular entertainment franchise.

“There is a lot at stake,” Phil Wahba recently reported for Fortune magazine. “NPD Group has forecast toy sales will be up 6.2 percent for the full year in 2015. While Walmart has never disclosed the size of its toy business, using the annual reports of Mattel and Hasbro as gauges, Walmart has roughly twice the market share of Target and Toys ‘R’ Us. (Last year, Walmart sold $1.1 billion worth of Mattel toys alone.)”

Walmart holiday shopping and layaway has already begun, and there is a great deal of excitement among consumers and the retail community alike. It will be critical to keep all eyes on both Walmart’s efforts as well as those of Walmart’s competitors.

Given that many retailers have already lowered or eliminated layaway fees and expanded terms, it will be interesting to see what more can be done to enhance the layaway experience for consumers.

If further innovations succeed, layaway may continue to prove a crucial tool in ratcheting up holiday sales, even as the economy continues to improve.