Layaway is a popular option for many retailers that want to sell more items to their customers. According to a recent survey, over ¾ of the people agreed that layaway was very important for large-ticket purchases. They liked this option because it allowed them to avoid borrowing money from credit cards, since the large purchase items could be paid off in installments.

What is Layaway?

Layaway is a program through which shoppers can reserve items that aren’t immediately available at the time of purchase, paying a set amount over a period of time until they pay off the item. If a customer fails to pay off the full price of an item by the end of the term, then it is usually either forfeited, and storage and other costs are incurred.

When deciding on a layaway plan, ensure you balance several factors. First, layaway duration should be proportional with storage needs. Next, the costs associated with layaway must also be considered: it could lead to losses in your margins. Lastly, consider allowing customers to place both sale items and non-sale items on layaway; but carefully consider that service fees may need to be collected. Overall, understand that there are state laws regulating these types of plans.

Why is offering Layaway beneficial?

Layaway programs provide customers with a unique option to shop—they can have what they want, when they want it. By providing layaway options, retailers are able to increase revenue and improve the overall customer experience. Let’s take a closer look at the benefits it offers:

1. No Interest Charge

No interest charges make layaway cheaper than using a credit card. That is always the better option than swiping a card that has high interest rates, with a layaway option they can make smaller payments without paying extra.

2. Flexible Payment Plans

Installments are a great alternative to offering a store credit card or credit plan because offering different payment options makes your business look generous and trustworthy. 

3. Builds Customer Loyalty

Since offering installment payments are attractive to consumers, it will help in your brand’s image as well as making your products more affordable for more people. Offering different types of promotions or incentives such as  gifts with purchase to people who spend a certain amount or purchase a certain item at your store can also be a great way to boost your customers’ spending.

4. Compete with today’s ‘Buy Now, Pay Later’ Programs

There are plenty of different online payment programs available in the last few years with fintech companies offering interest free payments with increased limits after customers pay on time after a certain amount of time which has been proven to be an effective method to increase sales for businesses. Offering your own payment plan is a great way to keep all of your profits instead of losing a percentage to third party payment companies.

In today’s economy, offering a layaway option can help your business stand out from the competition as well as provide your customers with more payment options.

A layaway program is a kind of a plan where the consumer pays for merchandise in parts. The consumer will not take the merchandise home with them until the full payments are made. This is an advantage to consumers, instead of buying on credit and the price being higher because of the interest. The store will hold the merchandise while at the same time keeping a record of how the customer is paying for it. Once they make full payments, the company releases the merchandise for them, and the customer takes the delivery. One advantage of a layaway program is that there is an assurance that the chosen merchandise will be in stock and ready for delivery when the item is fully paid for. This can come as an advantage to consumers who buy merchandise that runs out of stock quickly, and they don’t have the money to buy it instantly.

For a layaway program to work efficiently, the business must have a good layaway point of sale. The POS system will keep a record of how many customers are paying for their layaway programs and how they are paying them. Remember a customer can shop for different items in the business and at the same time he has a layaway plan for an individual item in the same business. A layaway program is beneficial to both the retailer and the customer.

The POS software should be able to keep track of the stock that customers are paying layaway programs for. The POS system should calculate the amount of stock remaining based on the data of the customers paying layaway programs. If the stock that is remaining can only fit the layaway program customers, the POS system will alert you that there is going to be a low stock condition and make the order for more stock. A good layaway point of sale should not sell stock that is already on the layaway plan. This is because the customer is expecting to find the stock in place after making full payments of the item.

Layaway programs help businesses compete by installing trust in their customers. The customer is always assured that the item they are paying for will be waiting for them in stock after they finish paying. This way the customers are more likely to be shopping in the same place to keep in check with their layaway programs. When a customer goes for shopping, they will always remember the store they made a deal with in a layaway program and they will have the feeling of honoring the store by visiting more often.

A layaway program is kept in track by the layaway point of sale. If you have an inadequate and ineffective POS system, your layaway program will fail terribly. Acquire a good point of sale system that will keep track of the layaway programs payments and coordinate that with the stock. The program is an advantage to most of the retailers in that it allows them to offer products to low-income customers. The customer will consider this like a savings plans where they will not fail to pay when the time comes.