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Global retailer Wal-Mart Stores Inc. (NYSE:WMT) ended its layaway program this past September, much to the chagrin of millions of customers who used the program, making installment payments in order to take home a piece of merchandise once the balance was paid in full.
Why did Wal-Mart end its layaway program? The reason is pretty simple, really. Profits and inventory. The sheer scale of Wal-Mart's presence in the U.S. meant that if even a portion of its customers took advantage of the layaway program, millions of dollars -- and probably much more -- of "sellable" inventory was tied up behind a counter where it could not be immediately sold. In a company and business (discount retail) where inventory turnover is everything, Wal-Mart's bean counters probably did not like to have all that merchandise in layaway; merchandise that could have been sold to eager "pay now" customers. This is particularly important in light of Wal-Mart's recent downturns in same-store sales.
In my opinion, Wal-Mart succumbed to the quest for immediate gratification, most likely brought on by certain elements of the short-sighted investment community, by doing away with a program that -- gasp -- actually helped lower-income customers. With the layaway program, many managed to eventually purchase products they couldn't have otherwise. It is also possible that Wal-Mart may have lost some sales due the layaway program's demise.
In reading some of the comments when BloggingStocks first reported the news, as well as recent user comments as the holiday shopping season gets underway, I get the sense that this has affected many people. For example, a commentator writes: "Many, many women, myself included, liked to go to Wal-Mart during those Holiday sales and take advantage of the sales prices. We would do all of, if not, most of our Christmas shopping there and then put it all on lay-away. [...] This season Wal-Mart didn't get nearly as much money out of me as they did last year. And I haven't changed my Holiday shopping needs at all this year."
What do you think? Has the end of Wal-Mart's layaway program bummed you out?
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Reader Comments (Page 2 of 2)
12-18-2006 @ 10:14AM
Suz said...
Hello!
Here is my view on this situation.
I have always used layaway at Wal-Mart. I loved the program as I felt it was fiscally responsible, more so than credit cards. I teach at an after school non profit organization and we have depended on layaway in the past for the equipment we have needed for our classes, etc. It is not just the occasional holiday shopper that has used the layaway program. More and more, teachers are paying for classroom supplies and equipment out of their own pocket. In instances like these, layaway is a big help. I think that perhaps Wal-Mart is not looking ahead. They say that shoppers can get credit cards, etc to pay for purchases and this is true. However, the bigger picture may be that getting those cards will create more consumer debt leaving less money for Wal-Mart customers to spend in the store in the future. If this were a smaller chain, the impact might not be so great. But Wal-Mart is the largest discount store chain that I can think of. I don't know the exact statistics on the number of Wal-Mart shoppers in the US, (perhaps someone does and can post that here?) but should the customers retain credit for their Wal-Mart purchases, as one article suggested, I foresee the future impact being pretty big.
Please understand that I am not bashing Wal-Mart. I still shop there. But for big ticket items and things for our program, I will probably shop somewhere that has layaway.
Thank you.