Sep 29, 2021
Before credit cards became ubiquitous, layaways were a popular method of allowing customers to purchase high-priced products without having cash on hand. Although less used than before, layaway programs have remained an option at large retailers – although one of the biggest forces in retail is now shedding theirs in favor of a model. different.
As the 2021 holiday season approaches, Walmart has announced the end of its layaway option, according to Business intern. The program is replaced by a buy now, pay later (BNPL) financing service in partnership with the provider Affirm. The retailer, which first partnered with Affirm in 2019, was already phasing out the layaway last year, only allowing it for certain jewelry purchases. The BNPL allows customers to immediately bring their purchases home and pay for them in installments. Unlike a no-cost layaway program, it can have an annual percentage rate of 10-30%.
Walmart is part of a shift by large retailers to implement BNPL financing. Retailers and consumer brands including Best Buy, Macy’s, Nike, and Sephora all offer BNPL options. Apple offers a BNPL option in Canada and Amazon.com has launched a BNPL payment option for purchases over $ 50 on its platform.
While the layaway – that customers don’t receive their purchase until they’ve made all of their payments – may sound like a dinosaur in a favorite world, the model has maintained its popularity.
Thirty-three percent of customers in 2018 planned to use the layaway to buy their Christmas presents, according to PYMNTS. While the model had all but disappeared by the early 2000s, subsequent financial crises of that decade prompted large retailers to bring it back. Walmart, which had already phased out its layaway offer in 2006, brought it back in 2011. Distrust of credit cards and their propensity to allow overspending are among the reasons customers choose to lay aside. .
Some have suggested that the advent of installment payment methods is an attempt to capture younger, more indebted customers. These services are also on the rise following a 2010 law that made it more difficult for people under the age of 21 to obtain a credit card.
DISCUSSION QUESTIONS: What do you think are the main benefits of Buy Now and Pay Later programs for retail operations? Is there still room for layaway programs in retail?
“My fear is that there is a bubble here waiting to burst.”
“There will always be a need for a set aside for a customer segment and a product line.”
“Setting aside as a concept, in this modern field, for me, it’s dead. It’s complicated and messy from a process and IT perspective now that BNPL is increasingly adopted. “