The future of layaway is an uncertain one, but as technology evolves and retailers embrace a holistic, omnichannel strategy, it will also provide savvy retailers with opportunities to improve layaway performance and enhance cross-promotional efforts across channels.
Challenges and Opportunities
The popularity of layaway has long been tied to economic factors beyond the control of individual retailers. Layaway plans first surfaced during the Great Depression as a way to help consumers with little money make purchases by allowing them to pay for reserved items in installments. Ever since, the popularity of layaway has depended on the availability of credit. A decade ago, layaway was all but forgotten, but it experienced a resurgence in popularity when credit started tightening. For example, during the financial crisis of 2008, Kmart pushed layaway as part of its holiday marketing campaign.
Moving forward, technology, credit, and other economic factors are likely to lead to an evolution that could radically change the future of layaway. Forward-thinking retailers can take advantage of new technologies and omnichannel capabilities to offer customers new purchasing options, improve operational efficiency, and enhance the customer experience. Here are three ways the future of layaway could change your retail strategies:
1. More Pre-Order Plans
Layaway has typically been used for big-ticket items, but the model has useful applications on a smaller scale as well. Take Amazon, for example. The eCommerce behemoth enables customers to purchase books prior to their release, but payments are not made until the orders are actually shipped. This has huge appeal for consumers who are loyal to a particular author or book series, and the model has applications in other retail sectors where franchises and brands have loyal followings. Video games, music, movies, toys, and cosmetics, among other items, all lend themselves well to this anticipatory purchase model.
2. Better Integration With Planning Across Channels
Today's retailers have access to more—and better—customer analytics than ever before. Companies who offer layaway can use the customer data these sales generate to better plan and scale their marketing, inventory management, and fulfillment strategies across all channels. For example, examining layaway data can help you determine staffing and inventory needs during the holidays.
If you plan to run a marketing campaign that promotes your layaway program, as Kmart did in 2008, you can use historic data to make more accurate sales projections so you can ensure that you have adequate shipping capacity when you need it most and that the necessary inventory is in the right place at the right time. If, on the other hand, you find that layaway sales are running behind trend, good data will help you understand why. Perhaps it's simply because the hot toy of the season is not as popular as the must-have toy of the previous year. Or macroeconomic issues, such as the availability of credit, could be at play. The better your data is and the better you analyze it, the better you will be able to plan for the future and revise your strategies—whether that means adjusting set-up fees, scaling back shipping support, increasing marketing efforts, or making other appropriate changes.
3. A More Personalized Customer Experience
Many modern customers want (and expect) an engaging, personalized retail experience. Since layaway programs require payments to be made in installments, they provide organic, regular opportunities to engage with customers more frequently. When each payment is made, you can thank the customer for her order, ask for feedback, and even offer her an opportunity to participate in a survey. If your company offers a loyalty program, it also provides an opportunity to ask non-participating customers to join and to provide participating customers with reward points or customized offers and updates. By asking for—and responding to—customers' feedback, you engage them with a personalized message and show that you truly value their business.
Additionally, retailers can use layaway data along with other customer data to increase marketing efficiency and provide customers with more targeted, customized offers that they will value. For example, if a couple completes a baby registry or purchases a crib, for example, using a layaway plan, the retailer already has valuable information about that customer's future needs. By collecting rich information when the couple places its first order, the retailer knows when to send out targeted promotions and offers based on the current age of their child. But remember, too many targeted promotions will lose their effectiveness; make your marketing materials matter so they are noticed, not ignored.
While the popularity of layaway may depend largely on external economic factors, with the right technology and systems in place, retailers can make their layaway programs more attractive and accommodate and anticipate customer needs across every channel.