Kmart beefs up layaway scheme eyeing early holiday demand

[September 10, 2015] By Nathan Layne

(Reuters) - Kmart has expanded its layaway program and dropped the requirement for a down payment on a lease-to-own scheme, joining other U.S. retailers in trying to get a jump start on holiday shopping demand.

Kmart, a unit of Sears Holdings Corp, started allowing customers to sign up to buy items in installments with no down payment last week, an option it will offer every day through the end of November, a company executive told Reuters.

That represents an expansion on its layaway scheme last holiday season, when it limited the no-money-down option to certain weeks, said Jai Holtz, president of financial services at Sears.

Kmart is also allowing customers to tap its rent-to-own program without a down payment - a first since the scheme for big ticket items like refrigerators and TVs was launched in 2013. That option will also run through the end of November.
 

The moves by Kmart come as rivals also take steps to capture holiday demand. Wal-Mart Stores Inc <WMT.N> started its layaway scheme in late August, two weeks earlier than in 2014. The largest supermarket chain in Texas, H-E-B, has also launched a layaway program and related promotions.

"There is absolutely a trend to an earlier holiday. And so we are trying to meet that demand," Holtz said.

Holtz said toys, electronics and apparel were among the top categories in layaway. While many customers used the program to budget their spending, others saw it as a way to store toys that might be discovered by kids if kept in the house, Holtz said.

The leasing program meanwhile has a minimum purchase of $69 and the path to ownership can come at a cost. Using a calculator on Kmart's website a customer seeking to buy an item worth $500 would end up paying $692 to buy out the lease after financing it over five months of biweekly payments.

Holtz noted the company had devised early purchase options at 30, 60 and 90 days that would limit the premium paid over the initial sticker price.

Similar to Wal-Mart, Kmart's customer base tends to skew towards the lower end of the income scale.

Holtz said the layaway and leasing program were designed to tap into demand at various income levels.

"We see a great layaway business in our Beverly Hills Kmart store. This is a program that goes across all demographics," he said.

(Editing by Miral Fahmy)

[© 2015 Thomson Reuters. All rights reserved.]

Copyright 2015 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.