Layaway Is Out of Control

The competition for layaway shopping this holiday season is getting fierce.

It's making me sick.

Sears Holdings' (Nasdaq: SHLD  ) beleaguered Kmart concept paid up for a promoted Twitter tweet yesterday. The company's KmartDeals Twitter account is offering a $5 or $10 e-gift card for layaway orders placed through the end of this week.

It seemed like a deal that was too good to be true, so I dug a little deeper.

Kmart offers a layaway plan where shoppers can prepay for items over the course of eight weeks, picking them up once their final payment is made. Gee, eight weeks from now would be after Christmas. Right? Sorry, Santa. I guess you can call this sleigh away.

However, that's not what irks me, since folks can just pay up early. Kmart is touting a small online gift card to Twitter users -- cleverly leading to an additional purchase down the line -- but there's no free lunch here. Apart from prepaying for merchandise and not getting any accrued interest there's a $5 service fee when initiating a new order (or $10 for the 12-week layaway plan). If you wind up somehow buying the item elsewhere, or you can't make the payments, there's a $10 cancellation fee.

So much for the value of that e-gift card!

This is apparently the season for Thanksgiving night operating hours and layaway. Wal-Mart (NYSE: WMT  ) , which had abandoned its layaway practice several years ago, got back into the game last month. It also charges a $5 service fee, all for the right for folks to prepay for an item.

Why isn't there more outrage over this? Bank of America (NYSE: BAC  ) got raked over the coals when it wanted to make back some of its lost profits by charging debit card users a monthly fee. Occupy Wall Street played a part in silencing that wave, so why is layaway getting a free pass?

Oh, and shame on Kmart for promoting this e-gift card offer -- essentially covering the service fee --through Twitter. Something tells me that most holiday shoppers that need layaway as a disciplined saving program aren't on Twitter to learn about this online deal -- much less registering for Sears Holdings' Shop Your Way Rewards program as required for the e-gift card promo.

I know which retailers are getting my lump of coal this season.

I would propose an Occupy Kmart protest to vent, but something tells me that store managers would freak out if there were actual people in some of the woefully outdated stores.

The Motley Fool owns shares of Bank of America and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On November 22, 2011, at 12:20 PM, DJDynamicNC wrote:

    "I would propose an Occupy Kmart protest to vent, but something tells me that store managers would freak out if there were actual people in some of the woefully outdated stores."

    :lol: Outstanding

  • Report this Comment On November 22, 2011, at 12:49 PM, VCU87 wrote:

    "Bank of America (NYSE: BAC) got raked over the coals when it wanted to make back some of its lost profits by charging debit card users a monthly fee. Occupy Wall Street played a part in silencing that wave, so why is layaway getting a free pass?"

    Dude, seriously? OWS had nothing to do with that fee being tossed, it was a p.r. nightmare and they were hearing from (and losing) their customers. Don't shill...

  • Report this Comment On November 22, 2011, at 1:01 PM, DJDynamicNC wrote:

    ^^ I wouldn't say we had nothing to do with it, just as I wouldn't say that OWS can claim full (or even a majority) of the credit. But OWS is a reflection of an increasing aversion to big bank policies and indicative of the mood of the nation, and Bank of America may be evil but they certainly aren't stupid. It might be a coincidence that the fee was cancelled in the run up to Bank Transfer day, but then again, it might not.

  • Report this Comment On November 22, 2011, at 4:30 PM, memoandstitch wrote:

    There are real costs associated with keeping items in a retailer's inventory.

    Also the fear of price increase, which feeds these layaway plans, is caused by the Federal Reserve.

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