Major retailers are starting to shed this popular benefit

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Previously, savvy shoppers started hunting for Christmas presents in May, taking advantage of in-store layaway programs to spread payments and shop earlier. But it looks like the layaway is following the dinosaurs’ path.

Some stores that once offered layaway options customers have now abandoned these programs in favor of “buy now, pay later” programs like Klarna, Afterpay and Affirm, according to CNBC. Just recently, Walmart announced that for the first time in company history, it will not be offering a layaway this year and instead suggest customers shop with Affirm.

Read on to learn more about who is phasing out layaways and what these new apps have in store for the future.

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Layaway has been an option for cash-strapped buyers for almost a century. According to a PBS interview with a retail historian and professor at Harvard Business School Nancy koehn, layaway first became popular in the 1920s. Many retailers created “installment plan” programs so ambitious consumers could participate in the new economy and make purchases like cars and radios, Koehn said.

For shoppers, the allure of layaway is to claim a product while paying for the cost of the item over time. But the downside is that customers have to wait until they have paid for a product in full before they can take it home.

Yet layaway programs benefit people with bad or no credit in that they provide the ability to pay for an item over time without having to pay interest. In addition, failure to pay for a layaway purchase will not affect your credit rating.

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app icon of klarna app in app store on phone screen top view
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As layaway plans are phased out, a similar option becomes increasingly popular: “buy now, pay later”, which allows consumers to buy an item right away and then pay for it. in several installments. The idea of ​​postponing payment while still being able to get their hands on a product right away is becoming very popular with buyers, especially younger customers. Many of these programs target Gen Z consumers who have not yet built up credit or who tend to approach credit cards with high levels of mistrust and suspicion.

Moreover, as Klarna explains on her website, “unlike a credit card limit that increases the more you spend – and may encourage more spending – we cap how much you can spend using the app (i.e. amount you have to pay) based on your financial situation at the time of purchase. “

For some established businesses looking to attract younger customers, the use of “buy now, pay later†programs have given them an added boost. “We launched Klarna on the Macy’s website in October [2020] and we’ve since expanded it to Macy’s, Bloomingdale’s and Bluemercury, both online and in-store, â€said the CEO of Macy’s. Jeff Gennette told CNBC. “With Klarna we continue to see higher spend per visit and increased acquisition of new, younger customers, 45% are under 40 years old. Our goal is to convert all of these new customers into loyal Macy’s customers who come back for future purchases. “

Overall, research firm RBC Capital Markets estimates that “buy now, pay later” programs have increased consumer spending in-store by up to 50 percent, reports CNBC.

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Women's jewelry stores just in case
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In many cases, these “buy now, pay later†programs offer zero interest rates, but there are higher transaction fees for retailers and late fees for customers, which can really hurt. ‘add. A program called Afterpay has come under fire after discovering that about a quarter of its profits came from late fees in 2018, according to The New York Times.

In addition, if customers do not make their payments on time, their file may be sent to a credit bureau or sent to a collection agency for payment, as would be the case with a regular credit card.

Some of these programs also charge interest based on the size and type of purchase and the repayment schedule.

Walmart checkout
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Walmart shoppers were surprised to learn that no stores in the United States will be offering legal service this year, which was recently confirmed to NBC affiliate WRAL. The retailer’s website also no longer advertises the normal layaway option. Instead, they offer “buy now, pay later” through Affirm. According to Walmart, if your purchase is between $ 144 and $ 799.99, you may be able to finance the purchase over three, six, or 12 months through Affirm. But if you’ve spent $ 800 to $ 2,000 (the maximum to qualify for Affirm), the funding option is available over 12, 18, or 24 months.

There is also financial burden with Affirm, which can be an Annual Percentage Rate (APR) of between 10% and 30%, depending on the credit.

The option is available for items sold in the electronics, home, automotive, sports, toys, baby, clothing and jewelry sections, while other products including drugstore, grocery, alcohol, tobacco , baby consumables, pet supplies, wireless service plans, gasoline and weapons are not eligible. But that could also change. “These Walmart.com categories are not exhaustive and are subject to change without notice,” the retailer notes on its website. “To purchase items that are not eligible for funding, you will need to provide an alternate payment method.”

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