December 5, 2013

Layaway programs a customer courtesy, Wichita retailers say

For as long as Dan Hernandez has owned Powell Jewelry, the northwest Wichita retailer has offered a layaway program for its customers.

For as long as Dan Hernandez has owned Powell Jewelry, the northwest Wichita retailer has offered a layaway program for its customers.

The number of people who use the 90-day program may represent a fraction of the store’s business now, but offering it is good business, he said. It goes toward making it as easy as possible for the customer to do business with Powell.

“It’s always been an important part of the business,” said Hernandez, who in 1997 bought the more-than-80-year-old jewelry store at 2441 N. Maize.

More than four decades ago, layaway was a common method used by consumers to pay for holiday gifts. So, too, were Christmas Club savings accounts, which allowed consumers to routinely set aside a certain amount of money and, at the end of a 12-month period, withdraw the amount they had saved plus interest, then use that to pay for Christmas.

Then came the 1980s, and with it broader consumer access to revolving lines of credit, or credit cards, which marked a turn in both the saving and spending habits of consumers.

Most consumers traded in layaway and Christmas savings programs for that plastic in their wallet.

But for the traditional shopper, the programs still exist.

Layaway, in recent years, has enjoyed a sort of revival after retail giants such as Kmart, Walmart and Sears turned to it as a way to lure cash-strapped consumers who were working with tighter holiday spending budgets during the nearly two-year recession that ended in 2009.

To be sure, layaway is not as commonly offered by retailers large and small as it was to the generations who grew up in or shortly after the Great Depression.

Among local, independent retailers, layaway is most commonly used by jewelry and furniture stores, or shops that sell products that cost hundreds or thousands of dollars.

“We’ve never really done away with it,” said Paul Hudson, owner of Lawrence Photo, 6508 E. Central. “To be real honest, the layaway portion of our business is a small amount. We offer it as a courtesy ... anything to make it easier for the customer.”

Neither Hudson nor Hernandez could say whether they’ve seen an increase or decrease in the use of layway over the years. Their general feeling is the use of layaway, although small, has been fairly consistent over the years.

A spokeswoman for the National Retail Federation said in an e-mail to The Eagle that her organization doesn’t track data on use of layaway programs by its members. She said some retailers, including Walmart, eliminated layaway fees as part of their holiday promotions.

Saving for Christmas

Christmas Club savings accounts, like layaway, used to be more common and available at a variety of institutions, including banks and credit unions.

Fewer institutions offer them and fewer people use them these days.

“It pretty much peaked in the ’70s and has declined since then,” said Bruce McClary, spokesman for ClearPoint Credit Counseling Solutions, a Richmond, Va.-based nonprofit credit counseling agency.

McClary said he thinks the use of the accounts declined because of a variety of factors, including an expansion of banking options and credit, cycles of recession and the restrictions that Christmas accounts had, such as penalizing the consumer for taking money out of the account before the end of a year-long cycle. “It was one of those things where you didn’t have the freedom to pull money out as you like,” he said.

Lee Williams said her credit union, Central Star Credit Union, has offered a Christmas Club account as long as she has worked there, since the early 1980s.

“It was a way to avoid using credit cards instead of laying away toys, (members) were laying away money,” said Williams, Central Star’s president.

She said there has been a clear decline in use of Christmas accounts at Central Star over the years. She estimates that this holiday season, Central Star members had a combined total of $450,000 in Christmas club accounts. “Ten to 15 years ago, we were probably mailing out $800,000 to $900,000 in Christmas Club checks,” she said.

Unlike the traditional Christmas Club accounts of decades past, Williams said her credit union offers a savings rate that is 0.15 percent higher than its standard savings account.

At Wichita Federal Credit Union, its Christmas Club account offers a 0.5 percent annual yield, said Heather Rice, marketing manager. Rice said that’s a 0.25 percent higher rate than what her credit union’s regular savings account offers.

Still, Rice said, less than 3 percent of Wichita Federal’s membership uses a Christmas Club account.

Nationally, McClary said the standard interest rate on a Christmas Club account ranges from 1 percent to 2 percent, compared with the standard interest rate on a savings account that pays less than 1 percent.

“If the difference in the rate of return continues the way it is, I think there is a place for Christmas Club accounts in the future,” he said.

Steve Carr, president and founder of Community Bank of Wichita, said he and his staff in the past considered offering a Christmas Club account.

“We might get one of two requests for them a year,” Carr said. “It’s kind of gotten out of fashion, if you will.”

Based on his past experiences working at other banks that did offer the accounts in the 1970s and 1980s, he’s not sure it’s worth the trouble.

“It was so labor intensive keeping track” of those accounts, Carr said. “We probably had a couple hundred accounts, but if you added all the balances up there might be $6,000 or $7,000. I don’t know that there’s much cost-effectiveness to it, benefit versus expense.”

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