Businesses Retool Layaway Programs Ahead of Holidays
With the holiday shopping season fast approaching, and recent news of major retailers such as Toys R Us and Wal-Mart retooling their layaway programs, many smaller merchants I've talked to are considering adding a layaway option.
A layaway program has the potential to build brand loyalty and drive repeat traffic to your retail business. First, decide if offering a layaway program will work for your business. To answer that question, look at your business model and determine what (such as value proposition, channels, revenue streams and cost structure) will need to change in order to run an effective layaway program.
If you determine that it might increase business, here are six tips to help you successfully create a layaway program:
1. Create a layaway agreement. Everything about your layaway program should be clearly spelled out in a document that your customer agrees and signs. Terms and conditions should include: minimum price for items, payment options, deposit amount required, service fee, policy on cancellations and refunds, lowest price guarantee, items not eligible for layaway, and final payment due date.
2. Start now. The sooner you start your layaway program, the more people will know about it, participate in it, and potentially tell others about it via on and offline word of mouth.
3. Promote the heck out of it. This should go without saying, but you need to inventory all of your customer touch points to determine the best way to use each one to promote your layaway program. For instance, if you re-purpose last year’s print advertisements or in-store holiday signage, don’t forget to add something about this year’s layaway program. If you’re active on social networks such as Twitter, Facebook and Pinterest, promote the program there as well.
4. Fine-tune your inventory levels. Forecasting this year’s holiday inventory means taking into account your new layaway program. If your terms and conditions state layaways are only available on items that cost $250 or more, then be prepared to order excess inventory of your higher priced items. Better yet, see if you can secure commitments from your vendors to drop ship products on your behalf for layaway fulfillment.
5. Make room. Speaking of inventory, if it’s not in stock, you can’t sell it. If you’re used to turning your inventory once every 30 days, you’ll need to make adjustments for those items that you’ll hold onto for a longer period of time, guaranteeing they’ll be available in early- to mid-December. You may also need to locate more space in order to carry some inventory longer than you’re used to.
6. Don’t forget about online. According to the U.S. Commerce Department, online retail sales totaled $194.3 billion in 2011, which means layaway is just as applicable online as it is at a brick and mortar stores. One startup, Tallahassee, Fla.-based eLayaway, has even developed a turnkey system for managing online layaway using your existing website and ecommerce platform.
When consumers want to save money, they tend to make what they feel are smart purchases, and by offering a layaway option, you make it easier for them to justify their holiday gift-buying.