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CrossCheck's Multiple Check vs Walmart's Layaway

Posted by Tom Lombardo | Thu, Oct 02, 2014 @ 11:00 AM

In Home Layaway vs Walmarts Layaway

So, when will retailers begin Holiday Season advertising in August?

It couldn’t be that far off. The starting gun for Black Friday used to be regular business hours, then an hour earlier, then long before dawn, but today retailers have pushed it all the way back to the previous night, competing with the sanctity of Thanksgiving dinner for our time and attention.As if that development means some taboo no longer exists, Kmart just released a Holiday ad – which begins by wryly informing you that it’s “not a Holiday ad” – in September, extending the holiday shopping season into the back-to-school space.

Taboo or Competitive Business Practices?

But there’s a good reason for that. Last year Wal-Mart announced a no-cost layaway plan which allowed customers to pay as little as 10% of an item’s price to reserve it in layaway. This year Kmart, Sears, Toys R Us and Best Buy all followed suit.

Their policies differ in the particulars, but for most of them the no-cost option expires around the beginning of October. After that they charge either a nominal fee or a percentage of the purchase before they will hold items.

It makes sense to try to provide customers with a benefit that might capture holiday sales right now, especially since sales were sluggish all year until September finally saw an uptick in consumer confidence and a rebound in retail.

It also makes sense to give people a little time to pay. Today’s hyper-conservative shopper strives to save every penny, so giving them several weeks to budget and to pay may prompt them to spend more.

The Other Thing Wal-Mart Did

layaway availableAnd perhaps making more sense than anything else is providing customers with the payment options they want.

One of the main reasons people find layaway attractive is to avoid using their credit card to finance the purchase. Over the course of the recession Americans closed 400 million credit card accounts and deleveraged across the board, and today most shoppers use far less credit than they are issued. They charge things constantly to earn “cash back” or points, but they do not carry a balance.

Understanding this fiscal conservatism and knowing that over the recession one in five people increased their use of checks, largely because checks have the highest rating for accounting accuracy and appeal to the fiscally responsible, Wal-Mart is now offering checking accounts.

You may recall that back in 2007 they were thinking of creating their own bank, and while they didn’t go in that direction they have decided to partner with the company that provides gift cards to them and to many other retailers, Green Dot, to enable their customers to write checks.

Since they just announced this in September and didn’t specify a start date, it’s probably not a holiday tactic for this year, but you can rest assured it will be next year.

Wal-Mart’s Weak Spot

Also back in 2007 the Economic Policy Institute released a report that confirmed what many Americans suspected: unto themselves, Wal-Mart’s business practices cost the country 200,000 manufacturing jobs. This was a hot issue before the recession and it’s even hotter now, because the net effect – intentional or not – was to deprive people of good-paying jobs, to herd them into low-paying service jobs, and to thereby make them dependent upon Wal-Mart’s low prices.

Today Wal-Mart is rectifying this situation as fast as it can, making a much-publicized commitment to spend $250 billion on goods “that support American jobs” over the course of the next ten years.

And the demand for “Made in America” has skyrocketed, with the ultra-valuable demographic of men between 18 and 35 leading the charge.  Buying American can be confusing – a typical Toyota, for example, is much more “American made” than a Ford, even though Toyota is a Japanese company – but the sentiment is straightforward enough. And you can play on it simply because you’re an independent retailer and not a multinational corporation.

Your Strongest Competitive Position

Made in the USAPutting it all together to drive sales this holiday season, you would want to offer something even better than the mass retailer’s version of layaway.

You’d want to cater to fiscally conservative customers who prefer to pay with checks.

And you’d want to emphasize the fact that you’re an American business supporting domestic jobs – especially if you also sell merchandise made domestically.

We can’t help you with the last one, but we can certainly help you with the first two.

In-Home Layaway

Any salesperson will tell you that the “puppy dog close” works better than any other tactic. The close goes like this: “Since you’re thinking about buying this puppy, why don’t you take him home and play with him for a week? If you don’t like him, bring him back.” Do you think that salesperson will ever see the puppy again? Of course not – as soon as people physically take possession of something they become emotionally attached to it and proud of their selection – even if it’s not a puppy.

This reveals layaway’s greatest weakness: the merchandise stays at the store. With no physical hand-off, the store runs the risk of losing the sale. The mass retailers charge a small “re-stocking fee” when layaways fall through, and since they have less riding on every sale it doesn’t matter to them if the $500 in revenue expected from a layaway arrangement drops to $5 when the customer changes their mind.

For most independent retailers, that would make a much bigger difference, and the puppy dog close may be your best defense against a problem like that.

Using the Puppy Dog Close

With our Multiple Check option you can accept two to four checks to be deposited over a period of time and let your customer walk off with their purchase today. It’s exceedingly simple and our merchants love it: you have your customer write the checks and then you ask us to guarantee each of them. If we do, then your revenue is guaranteed –even if one of the post-dated checks is returned, you get paid and we deal with the problem.

From your customer’s point of view they have matched their payment schedule to their cash flow. From your point of view, you made a full sale.

We call it “in home layaway.”

So if you decide to go with the flow and have a holiday decoration peeking out from behind your Halloween display, or if you even cancel your Thanksgiving plans so you can open your shop to (possibly delirious) bargain hunters, be sure to let them know that you have something much better than layaway the moment they walk in.

In our experience, the merchants who offer “in home layaway” right up front have the greatest success with it. Learn more here. 

hold check, payment flexibility, increase sales

Topics: Retail, Multiple Check

Written by Tom Lombardo