The discount giant said it plans to start offering layaway programs much earlier than last year, starting on Sept. 16 versus last year's Oct. 17 launch date. According to Wal-Mart's U.S. Chief Merchandising and Marketing Officer, "The customer was saying if they had two more pay cycles that really would be helpful for them."
This development illustrates some pretty severe budgetary constraints on Wal-Mart's core demographic. One of the most difficult things Wal-Mart has been unable to achieve over the last several years is wooing more financially stable consumers into its stores.
Wal-Mart's core customers are unfortunately so strapped that they're juggling their finances from paycheck to paycheck, and are less likely to throw extra discretionary items into their carts. Meanwhile, some of those customers defected to rock-bottom discounters like Dollar Tree
Furthermore, Wal-Mart's thrown some interesting twists into its layaway program. It's raising the layaway fee by 200% to $15, but customers who make their final payments will be reimbursed for that charge with a Wal-Mart gift card in that amount.
One company this could particularly injure is already struggling Sears Holdings
Other retail companies with a history of offering layaway services include Best Buy
Although Wal-Mart's move could hurt some of the aforementioned retailers, the major takeaway is the suggestion of Wal-Mart's desperate straits. Its core customers are still struggling to make ends meet in an economy that's pushing them behind or giving them woefully few opportunities to get ahead. Reuters reported a mind-bending historical statistic about Wal-Mart: 85% of its stores' transactions are paid with cash. In other words, some of these folks aren't creditworthy and may not even have bank accounts.
Wal-Mart's shares have surged nearly 40% in the last year, following years of stock-price malaise. Given the macroeconomic climate and how it affects Wal-Mart's most important customers, the early layaway news gives one more reason to believe investors might want to get out while the getting's good.
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