Previously on hold, layaway making a big comeback

Kmart layaway clerk Tita Sabangan shares a laugh with a customer. The company will run a holidays ad campaign about its layaway service. (Rick Loomis/Los Angeles Times)

LOS ANGELES - Qiana Zimmerle got an early start on her Christmas shopping last week, heading to Kmart where she loaded up on toys, clothes, and a "High School Musical" game.

But with money tight this year, Zimmerle, 28, dropped the gifts off at the layaway counter and paid a small deposit. Over the next few weeks, she'll make regular payments on the $113.18 balance and pick up the items when she's paid it off.

"I have 12 nieces and nephews, so that's why I have to do it this way," Zimmerle said. "It's easier on me, moneywise."

After pulling back on layaway programs for years, retailers are touting the service as a financially savvy way to buy goods this holiday season. Already, many cash-poor and credit-strapped shoppers are responding by flocking to layaway counters at stores such as Kmart, Marshalls, and Burlington Coat Factory, and using online options such as eLayaway.com.

"The response has just been tremendous," said Tom Aiello, a spokesman at Kmart, which is running a national holiday ad campaign for its layaway service. "We know for a fact it's a big increase over . . . last year."

Retailers are hoping the availability of a layaway program will attract consumers who need a more manageable way to pay for goods, which could boost customer traffic during the coming weeks.

"The expectation on all retailers is that this is going to be an extremely tough holiday season," said Richard Giss, a retail analyst with accounting company Deloitte & Touche. "So they're reaching into the old retail bag of tricks. How do you get people to spend money when they can't afford it? You help them budget, you help them plan - that's really what a layaway plan is at its core."

Unlike credit cards, layaway plans usually carry no interest. Most stores require a small deposit or fee upfront and place restrictions on what can be put on layaway, such as perishables and clearance items. A typical layaway term is 30 to 60 days, Giss said.

Layaway programs rose in popularity during the Great Depression and became a common form of payment for consumers who couldn't afford the total amount of a purchase upfront. But once credit cards became widely available, layaway all but disappeared.

These days though, layaway is making a big comeback.

"People are looking to buy the things they want with noncredit based terms," said Michael Bilello, senior vice president of business development at eLayaway.com. "The lend-and-spend boom is over."

Bilello said eLayaway.com, a payment processing service affiliated with more than 1,000 merchants including Gap and Adidas, has seen a sharp rise in business from both consumers and retailers. The company, founded in 2005, has seen its membership rise from 10,000 registered shoppers in January to 75,000, Bilello said.