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Why Rewards of Layaway Outpace Risks: Sears Exec

Black Friday shoppers wait to pay for items in a Sears store at Simon Property Group Inc.'s Great Lakes Mall in Mentor, Ohio.
Daniel Acker | Bloomberg | Getty Images
Black Friday shoppers wait to pay for items in a Sears store at Simon Property Group Inc.'s Great Lakes Mall in Mentor, Ohio.

Layaway provides a lure for customers who might not have cash on hand to pay for holiday presents. But the service can also make it harder for retailers to manage inventory, and some customers never pay off their contracts.

Ron Boire, chief merchandising officer for Sears and Kmart stores, told“Squawk on the Street”that the rewards win out.

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“[Layaway] customers are more valuable,” said Boire. “They buy more, and at the end of the day, they become more loyal to the brand.”

Layaway has made a comeback in recent years as consumers remain skittish about paying interest on credit cards. Sears Holdings, the parent of both the Sears and Kmart stores, has pushed the service as part of a larger attempt to head off declining sales.

This holiday season, both Sears and Kmart will offer a suite of layaway incentives in a bid to boost sales this holiday season. Sears said this week that both stores will begin delivering layaway items in November. The stores will also waive layaway service fees for limited periods.

"Overall the financial benefit to our customers and to us way outweighs any risk we would take with this program," said Boire.

Competition for those customers is fierce this year, as many retail analysts expect holiday sales to rise between 3 percent and 4 percent, which is lower than last year's gain. This has prompted retailers to launch layaway incentives earlier than usual and provide extra services along with these programs. (Read More: Retail Industry Trade Group Sees Holiday Sales Up 4.1%.)

has also dropped its layaway fee and it will allow customers make reservations for its most popular toys for the first time. Wal-Mart Stores will refund $5 layaway fees with a gift card after the customers pay for the merchandise. It has also expanded the number of products eligible for layaway. (Read More:Hot Holiday Toys—Even Santa Needs a Reservation.)

Kmart is running a giveaway that will pay off one customer’s layaway contract each week at stores around the country. The company said that would add up to about 13,000 payoffs.

Since layaway usually entails going to the store at some point, Sears is attempting to make the shopping experience quicker and more convenient. Associates equipped with Apple iPads will help customers research and pay for products in about 500 Sears and Kmart locations.

At a press conference in New York City this week, executives also said Sears-branded stores will give employees five minutes to deliver curbside pickup orders, and process returns and exchanges. If they can’t beat the clock, customers will get a $5 gift card.

When Black Friday came up, the execs said the service would indeed be available on the busiest shopping day of the year. (Read More: Black Friday Prediction: Killer Deals on Electronics.)

All these services may be paying off. Media reports have suggested that the programs centered around toys have prompted early sales of products that are expected to be hot sellers, including tablet computers for kids, certain colors of Hasbro'sFurby, and Nintendo's WiiU, either through reservations, pre-orders, or layaway. (Read More:Hot Holiday Toys)

According to a survey from RetailMeNot, 40 percent of consumers are planning to begin their holiday shopping before November. This include nearly half of all women, and nearly four in 10 parents who say they will begin their shopping before November.

—By CNBC.com’s Tom DiChristopher

Questions? Comments? Email us at consumernation@cnbc.com.

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