Does Your Business Need Layaway?

Layaway programs are a fantastic way to increase your customer traffic and repeat business. To determine if a layaway program is right for your business, you must know layaway’s advantages and disadvantages and what changes you will need to make in your business plan to make your layaway program a success.

Advantages of a Layaway Program

Customers will buy wanted and needed products on layaway which they normally would not buy because of budgetary constraints. Plus with layaway, customers that would not buy items until money is saved will find that the wanted items are in store and not out of stock or discontinued. How does layaway work? The customer makes a promise to buy an item in return for your promise not to sell that item of merchandize to anyone else. You, as the retailer, can also put limits your layaway program. If you only want the big tickets items such as electronics, jewelry, or furniture as layaway merchandise available for purchase, then you have that choice. If you decide to run your layaway program on a total amount of several items, then you have that choice also. By having a layaway program, customers can, over time, purchase the popular items that sell out quickly giving your customers a better opportunity to purchase them. Layaway also gives your customers more buying options which may mean that they will buy more products in the long run.

Disadvantages of Layaway

The disadvantages of layaway can be in the business costs of handling purchase fees, down payments, cancellation fees and restocking fees. Even a customer with the best of intentions can’t always fulfill their purchase commitment. If this happens, then you have to deal with the aftermath. You will need employees to contact customers about the late payments, handling the cancellation fees and restocking the items abandoned. Also you will take a business hit on some abandoned merchandise returned to the floor that may not be able to fetch the full price you originally wanted, with you sometimes taking a loss below cost.

What Changes are needed?

There will be changes needed in your business plan. You’ll have to create a layaway agreement that fully spells out the terms and conditions of layaway purchases for the customer. This will include a minimum pricing for layaway items, what the payment options are and the deposit amount required. You’ll also have to decide the amount of the service fees, policies about cancellations of purchases, refunds, what items are not eligible for layaway, and when final payments are due. You also need to promote your layaway plan, mentioning it to customers, posting signs, and advertising. The use of social networks such as Twitter and Facebook are a good idea. You will also need more space for inventory as well as space for holding the merchandise that’s on layaway.

Layaway gives customer the freedom to make smart purchases and stay in budget.  Customers also don’t always want to use credit cards or acquire store cards, so layaway provides an alternative.  Perhaps best is that layaway offers a way of spending money without having the credit card hangover and holiday gift buying without feeling guilty.

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