Wal-Mart Is Getting Desperate

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Good news for budget-juggling holiday shoppers could be bad news for Wal-Mart (NYSE: WMT  ) .

The world's largest retailer is eliminating fees to open a layaway account, where it used to charge shoppers $5 to let them pay ahead for an order in installments ahead of Christmas. For shoppers who fail to complete their purchases, the discounter will reimburse them with cash refunds instead of gift cards, but it is reintroducing a $10 cancellation fee that it had eliminated a year earlier.

Opening an account is now as easy as making a down payment of $10 or 10% of the item total, whichever is greater, to begin the paying-off process. Wal-Mart is also expanding the number of products that can be placed on layaway to 35,500.

Outside of reintroducing the cancellation fee, this all certainly seems to be a sign of desperation. These programs aren't cheap to run, especially if you toil away at Wal-Mart's lean margins.

One final tidbit on that front: Wal-Mart is kicking off this year's layaway program on Sept. 13, three days ahead of last year's rollout. The program didn't start until October the year before that, when the bargain-minded department-store operator brought back the layaway offering it had shelved for years. 

Sears Holdings (NASDAQ: SHLD  ) will probably have to follow suit, as its meandering Kmart chain currently charges $5 for new accounts along with a $10 cancellation charge. Target (NYSE: TGT  ) has dodged actively promoting a layaway option, but it may not stay that way for long if Wal-Mart and Kmart begin to gain traction. 

Source: Wikimedia Commons.

It's easy to see why Wal-Mart's anxious to win this holiday shopping season. Sales have been soft in recent quarters, and over the past two weeks we've seen uninspiring reports out of Wal-Mart, Target, and Kmart.

The economy's improving, but these retailers are suffering as middle-class shoppers trade out of the discount department-store chains. Wal-Mart and Kmart posted negative same-store sales in their latest quarters. Even Target's "cheap chic" isn't enough, as the 1.2% increase in stateside comps in its latest quarter didn't keep pace with inflation.

Discounters need to target less affluent customers, and that's where layaway comes in.

Sure, there's a stigma to layaway. Many argue that participants shouldn't be buying what they can't afford right away. Shoppers should be smart enough to save up on their own. The fees also add insult to injury, but this isn't a "poor tax" on the same outrageous level as payday advance loans or pawn-shop sales.

Wal-Mart has kicked off this fiscal year with back-to-back disappointing quarters. It can't afford to blow the seasonally potent holiday shopping period. If that means layaway shopping without any initiation fees, it's a small price to pay as it finds itself scrambling for relevance at a point in the economic cycle where consumers are presumably open to spending more.

Wal-Mart's desperate, but it doesn't have much of a choice.

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Read/Post Comments (28) | Recommend This Article (12)

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  • Report this Comment On August 24, 2013, at 5:18 PM, jimatmad wrote:

    Wal-Mart needs to go out of business tomorrow. Today would be better, but it's kind of late.

    They just held a big to-do bragging that they were going to increase their Made in America purchases by 10% of what they spend in a year, and spread that 10% of a year's purchases over a decade. That would put an added 1% US made products in their stores. One Freekn Percent!

    And THAT's what their bragging about?!?

    Top that off with the fact that the surest way to have your town INCREASE it's use of food assistance is to bring in a Wal-Mart. They kill all of the real jobs in town. Then the people they hire can't make enough to live on no matter how hard they try.

    Every single day the American taxpayer subsidizes the Walton family getting very wealthy by abusing American workers at their stores, and sending American manufacturing jobs overseas.

    Like I said, tomorrow would be a GREAT day for every Wal-Mart store in the country to close forever.

  • Report this Comment On August 24, 2013, at 6:59 PM, wirenut1011 wrote:

    "Discounters need to target less affluent customers, and that's where layaway comes in.

    Sure, there's a stigma to layaway. Many argue that participants shouldn't be buying what they can't afford right away."

    Doesn't this basically serve the same purpose as the upper classes use of credit cards - minus the finance charges???

  • Report this Comment On August 24, 2013, at 7:15 PM, veigasol3 wrote:

    I completely agree with a above comment,they have more than enough money to raise salaries,when the government raised the minimum waige price Walmart was the only one to strike as if they cant afford to add extra 2dollars to those poor workers wages.they also shout how much charitable work they do,to me it just doesn't make sense.

  • Report this Comment On August 24, 2013, at 7:18 PM, YinzerRuss wrote:

    "Sure, there's a stigma to layaway. Many argue that participants shouldn't be buying what they can't afford right away.

    Huh? Assuming one doesn't need any of the items in a, say, $500 order for a couple months, which makes more sense.

    A--Putting a $50 deposit down, putting the order on layaway, and dropping into the store every so often to make a payment. Or.....

    B--Taking that same order, putting it all on one's Mastercard and carrying a balance on that card for a couple months.

    I understand that with Option A, one doesn't get the instant gratification that they've been taught to feel entitled to, but at the end of the day, my $500 order, which was on layaway for 3 months cost me $500. What is the Mastercard customer paying to carry a balance for 3 months?

    Concerning the "layaway stigma," if people shouldn't buy things because they have to put them on layaway, shouldn't the same apply to more affluent shoppers who buy things with their credit cards but can't pay the balance in full when the statement comes? They're buying stuff they can't afford as well.

  • Report this Comment On August 24, 2013, at 8:02 PM, jasper2903 wrote:

    As much as I despise Walmart, I have to almost feel sorry for them, that was "Almost" they pay their employees nothing to work there, they are severely short-staffed, they are constantly having empty shelves, and nasty employees that are fed up with being overworked and treated so bad by frustrated shoppers.

    This all creates a vicious cycle, that is costing them business when the customers decide to just start going elsewhere, is the cheap pay and lack of staff really worth all that, maybe when they have to close a lot of stores maybe they will start to get what is really going on, they need to start at their base and work to earn the respect of their employees and customers before the end comes that is already in progress as we speak.

  • Report this Comment On August 24, 2013, at 8:47 PM, ryanchandler25 wrote:

    The Walmart business model in a nutshell:

    1) Import 99% of your merchandise from China, including items like Alaskan Salmon.

    2) Pay your employees as low of a wage as possible. Dehumanize them.

    3) Teach your employees all the ins and outs of getting government assistance in the form of food stamps, Medicaid, etc.

    Companies like Walmart are the biggest exploiters of welfare and government assistance.

  • Report this Comment On August 24, 2013, at 9:49 PM, shawn6965 wrote:

    if Wal-Mart will go out of business small business will do better instead of closing down Economy will be better then ever

    Home all Wal-Mart close down who making chicness richer and American poorer

  • Report this Comment On August 24, 2013, at 9:54 PM, Pete1579 wrote:

    I love seeing all of the ignorant comments about Walmart. Sure, Walmart looks for the best available price, but so does everyone else. Who's fault is it really, that it happens to be located in China. As far as them not paying their employees a livable wage; look at their competitors, there isn't much difference in the pay scale from one to another. The best of all the comments is about Walmart going out of business or closing down, paired with all the Walmart employees that collect welfare. Since Walmart is the third largest employer in the world, that would make a lot of sense wishing for that many people to be unemployed.

  • Report this Comment On August 24, 2013, at 9:55 PM, Snidely74 wrote:

    I was a salared mgr for this co and I would agree with the above, and add this. Mgt at the top end is run by a bunch of morons, IT systems for operational support are buggy whip era and worthless for any kind of effective control. They secretly are behind this excuse for a pres because they want to throw as many workers on the federal system so they can even pay them less. Wal-Mart will survive as long as this economy stays as rotten as it is.

  • Report this Comment On August 24, 2013, at 10:27 PM, bvgfcd wrote:

    i be I havent spent $50 at wally world my whole life. walmart employees should unionize. screw the waltons.

  • Report this Comment On August 24, 2013, at 10:43 PM, greenfrog40 wrote:

    I work for wal-mart and I support my family with out any help from the state. I HAVE BEEN SUPPORTING MY FAMILY ON JUST MY WAL-MART INCOME FOR FOUR YEARS. People just love to hate for no reason, i own my home and take care of my kids just fine. Ya I am not rich and can not take trips every time i would like to but i can do what most people do on two incomes. I have worked other jobs for less money and more stress.

  • Report this Comment On August 24, 2013, at 11:11 PM, smurph49 wrote:

    Many years ago I worked at Walmart - part time - while I was going to college. The pay was not great, but it was sufficient to pay many of my school expenses. Working there should not be the end all of your working ambitions.

    Today;, I shop there for a few things - but will not buy groceries there, especially meat. We have some good grocery stores in our area with a much better selection than Walmart has - in all grocery items.

  • Report this Comment On August 24, 2013, at 11:21 PM, thedude47 wrote:

    we should thank them for making the grocery chains compete, i don't need to drive to wallyworld so much anymore- and it's their own doing!

  • Report this Comment On August 24, 2013, at 11:37 PM, thebraveoutside wrote:

    I will be honest. I am likely one of the "less affluent" customers Walmart is trying to woo. Don't get me wrong -- I am not completely uneducated. I can give the definite illusion that I'm actually well-read. We own a home. We have 2 incomes and we have 2 (older) cars. However, my family and I are probably one bad paycheck away from having a utility shut off. We are maxed out in credit (though our rating remains decent and we are very able to open new accounts when absolutely necessary). Let's just say: Who knows WHERE Christmas will come from this year. I have become progressively more poor and mired in bills.

    The problem is that Walmart will not really have anything I need to put on layaway. I love the idea that Walmart has reintroduced this program. Yeah, Walmart is trashy. I don't like shopping with them. But I can see that this will work for so many people. The issue will only lie in WHAT is worth it? Will I -- and the rest of America -- flock to them to get things of practically zero interest??

    I have 2 teenage boys. What could they want from Walmart? Laptops? Yeah, if I want to see them broken in a corner somewhere or pay for WiFi outside of the house. I can barely afford a basic cell phone bill, I'm not paying for WiFi aside from our in-home tower. They have a newer inexpensive desktop PC in their room to use for schoolwork or other personal reasons. A flat screen TV for their room? No. They have a 15 year old 27" TV that is more than adequate for their basic cable and XBox needs. Buying a new, big flat screen is a waste if it's unneeded. Clothing? Yeah... not from Walmart with teenage boys. They'd nonchalantly find their way to the trash within a couple of weeks.

    We also have 2 toddler girls... so I'd get them toys? Toys shouldn't be so elaborate for toddlers that they require layaway. After all, these are the same kids who find equal enjoyment in an empty margarine tub and a $40 "Elmo-themed Remote Control". So... unfortunately, this will not be useful for me. But thank you anyway, Walmart.

  • Report this Comment On August 25, 2013, at 12:36 AM, Klbled wrote:

    Some of the comments on here make me sick! First off, the person writing this article should really get their facts straight.....the $10 cancellation fee has been in place ever since layaway came back. Second, some of you really need to continue with your education (trying to make a point and not being able to spell...not good). Third, wishing all stores would close??? How many people would that put out of work? Over a million just in the US! And fourth, Walmart may be bad for some small businesses; however, they also give back to the community and bring a lot of jobs to the area! If you don't like the company, don't shop there! If you don't like working there quit....I'm sure one of these above would be glad to pay you more!

  • Report this Comment On August 25, 2013, at 12:45 AM, reddwarfone wrote:

    People who do not work at Walmart can support their family on the one salary they make elsewhere but the Walmart employee needs a second income to do the same thing. And many Walmart employees needs food stamps and federal assistance programs to help cover living expenses for them and their family! It doesn't take a rocket scientist to see how bad Walmart is treating their employees so they can keep opening more supercenters! What Walmart is doing borders on criminal behavior!

  • Report this Comment On August 25, 2013, at 1:41 AM, Justafool01 wrote:

    I would be happy if all Wal-Marts were to close. They are a destroyer of entire communities and have never kept to their own policies. No, we would not or should not see a terrible rise in unemployment as (I really hate to say this but it is truth) most of the workers are Mexican Nationals. Not legal and NOT supposed to be earning a wage in the US. It is difficult to find assistance in any Wal-Mart because no-one can speak English or American. American is a dialect of traditional English. How-ever, Target is just as guilty as Wal-Mart in their hiring practices, they simply pay more and look nicer. Targets products are of better quality and Target has never lied to the public about where their product comes from. Wal-Mart has. As for Sears/K-Mart, well all old things must be made new or they die...Though I like the idea of the "big Box" store, the "one stop shopping", I do not appreciate the lack of service and will willingly pay a little more for service. Holidays do not need to be filled with extravagance. There is zero difference between lay-away and a credit card except that the card fee will be much higher. The "class" comment was a jib that did not need to be in this article.

  • Report this Comment On August 25, 2013, at 1:44 AM, Justafool01 wrote:

    One more thing... Wal-Mart has one practice that should be illegal. The company holds life insurance on the elderly and disabled people they have working for them listing themselves as payee instead of the workers families. This has been going on for years.

  • Report this Comment On August 25, 2013, at 2:43 AM, jllutseck wrote:

    "As far as them not paying their employees a livable wage; look at their competitors, there isn't much difference in the pay scale from one to another."

    Costco's newest store starts employees at $11.50 an hour. The local Walmart starts employees at $7.70 an hour. I'd call that a very LARGE difference in pay scale.

  • Report this Comment On August 25, 2013, at 7:52 AM, lorisue1962 wrote:

    If WalMart was really DESPERATE......we would see better customer service overnight !

  • Report this Comment On August 25, 2013, at 8:17 AM, ironmeteor wrote:

    We stopped shopping at Wal Mart because of the check-out lines. It's always 15 minutes to check out. If there was on company in America who could get more customers by simply hiring a few more minimum wage workers it's Wal Mart. Everyone I speak to has the same complaint. But why won't they change it, incompetence. It's just stupid. They deserve what they get by only having 3 checkout aisles open all the time while Target never has a wait. I pay a little more at Target, but it's worth it and that's where Wal Mart really fails. They lost the mid to high end customer because they won't staff the store appropriately. Penny wise and pound foolish.

  • Report this Comment On August 25, 2013, at 11:12 AM, Johdi wrote:

    Sam Walton would roll over in his grave. He

    wanted Walmart to be a wholesome place where

    a family could stop in and get the items they need

    at a great price like the old family stores years ago. Now Walmart is just an over sized giant squashing every small business and community that may be in their way! Yes they say produce is locally grown I

    call BS. They say American made what one or two items the rest from China, Indonesia, Japan and Taiwan ect..... Lay away to help the people who want a Christmas and can't afford other wise go without and that bothers me Christmas is a family time why buy into the gifts for Kids ok yes! At 18 we stop with gifts our family gives throughout the year and Adult needs nothing!

  • Report this Comment On August 25, 2013, at 11:20 AM, joyholly wrote:

    I am thankful I don't have to shop at Walmart anymore. I used Layaway. I hated that they stopped it full time. I would use it for birthdays and more.

  • Report this Comment On August 25, 2013, at 12:42 PM, sbirdy wrote:

    Good. I hope Walmart sinks like a stone. It's deserved.

    There are always consequences for corrupt and inhuman behavior. One way or another.

  • Report this Comment On August 25, 2013, at 2:05 PM, clutch1958 wrote:

    I only buy jeans, Tshirts, underwear, socks, tires and Bridgeport pepperoni from Wal-Mart. The tires are US made and lower priced than at name-brand tire stores, who only seem to sell imported tires.

    The other stuff I buy there because there are no alternatives.

  • Report this Comment On August 25, 2013, at 2:12 PM, clutch1958 wrote:

    And-I went to Wal-Mart for groceries, and I kept the receipt.

    The next payday I went to Kroger's, and bought the same items.

    Figuring in the cost of gas, because I had to drive across town to Wal-Mart, and only 2 blocks to go to Kroger's, the savings was non-existent.

  • Report this Comment On August 25, 2013, at 11:14 PM, Pete1579 wrote:

    "Costco's newest store starts employees at $11.50 an hour. The local Walmart starts employees at $7.70 an hour. I'd call that a very LARGE difference in pay scale."

    You're comparing apples and oranges. Compare Costco to Sam's Club. You can't compare a wholesale warehouse to a retail store. Compare Target to Walmart. They may start out higher, but you have to figure the average hourly rate, and how often and what the wage progression is.

  • Report this Comment On August 26, 2013, at 10:29 AM, TMFBreakerRick wrote:

    Kibled, my source for Wal-Mart discontinuing the cancellation fee in 2012 and bringing it back this year comes from Wal-Mart itself.

    Check the table in Wal-Mart's own press release:

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