Retailers Can Help Consumers Reduce Personal Debt

 Retailers Can Offer Layaways As Short Term Informal Credit

Many consumer surveys indicate that consumers are obsessed with personal debt these days. Rightly so, a shaky economy and unemployment woes motivate people to cleanse themselves of debt as much as possible. I’ve discussed a migration to needs-based spending by consumers and how spending habits have changed to reduce spending and focus on paying off existing debt.

Last year I discussed the power of the Layaway Program. Layaways bridge the gap between increasing formal debt and the need for goods that consumers may not have the cash to buy outright. A layaway purchase holds a desired item or items for the customer in the store and enables them to make incremental payments over a short term, usually six months or less.

Layaways help consumers get items they may not be able to afford as an outright purchase and helps retailers close sales. To a consumer, layaways offer them short term credit that is considered informal and does not appear on a credit report or affect a credit score. Customers do not perceive layaway credit as a financial encumbrance. The consequences of failing to pay a layaway is the loss of funds paid up and the item returns to the store’s inventory. In some cases, most stores that cancel a layaway for the customer will refund their money and take the financial losses, just to make the customer loyal and happy.

Under these circumstances, layaways are an attractive method of buying large ticket items within a consumer society that has revised its approach to debt. Retailers must offer this largely forgotten program that fell by the wayside when easy credit made the Layaway redundant. Today, tight credit and fear of debt makes the resurrection of the layaway a powerful sales tool for the smaller retailer.

Take Action Today:

1) Review the concepts of Layaways with your team and devise a program for each store.

2) Develop your Layaway program’s key points such as minimum price point, payment cycles and your cancellation policy.

3) Introduce layaways with media advertising and signs in your store for consumers to be aware of. train employees to discuss layaway options with customers on the floor as part of the presentation.

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clientele, customers, relationships, layaways, credit