If you don’t have a layaway option, you could be missing out on a lot of sales. One study showed that over 30% of the people wouldn’t have made a purchase without this option. A primary reason for taking advantage of layaway is to avoid credit card debt. Since 2008, people are more aware of their credit scores and cautiously manage their debt. They are avoiding large balances, which means that they are willing to delay purchases, especially on large specialty items.
Understanding Layaway Transactions
Layaway is not a loan or an offer of credit. It’s a purchasing agreement that reserves an item for a customer who agrees to pay for it through installments over a period of time. There are different rules to impose on layaway transactions, such as cancellations or failure to pay. If they don’t pay in full by the end of the term, then the item is returned to the shelf, and fees are typically assessed for storage and other costs incurred.
Setting up a layaway program requires planning. First, you need to figure out how a person can qualify to receive this benefit. Usually, a current driver’s license or state ID is used. Then, you’ll need to decide upon how much of a deposit is required to secure the item. Typically, this is around 20%.
Deciding upon a cost-effective plan requires some balance. The duration of a layaway plan should be aligned with storage needs and carrying costs. Layaway may affect your margins, so allowing customers to put sale items on layaway could end up costing you money. Many companies will charge a service fee to cover these costs. You can also calculate late fees and penalties, but be very careful when doing this because there are state laws guiding layaway plans.
The Benefits of Layaway
Layaway programs are appealing in many ways that differ with each customer. Offering them this option has the potential to increase revenue and improve the overall customer experience. Here’s a look at some of the most significant benefits of layaway:
1. 0% Interest
People like this option because they do not incur additional costs. This makes layaway a cheaper option than using their credit card. Plus, offering customers 0% interest is a powerful message for any marketing campaign.
2. Payment Plan
Paying through installments is another alternative to credit cards. This allows customers more flexibility to make large purchases. Even if you already offer a store credit card or credit plan, layaway will appeal to those that want to limit activity showing up on their credit reports.
3. Credit History
A layaway plan eliminates the need to look into a customer’s credit history. Most layaway plans only require a valid ID. This is especially appealing for customers with a bad credit history. Also, layaway doesn’t hurt their credit score if they decide to cancel.
4. Product Availability
Layaway reserves a product and secures its availability. This is an excellent option for items that are in high demand, especially during the holidays.
A Better Customer Experience
Offering layaway requires planning and the right point of sale to manage it. These are not simple transactions and need to be handled with care. But, with all of the changes in today’s economy, providing more options for your customers will result in better overall customer experience.
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