NEW YORK (AP) — The layaway wars are heating up ahead of the winter holidays.
Kmart, a division of Sears Holdings Corp., said Friday that it's waiving the fees that shoppers pay to open its interest-free pay-over-time program at its discount stores and online through Nov. 17.
The parent company, based in Hoffman Estates, Ill., plans to do the same for its Sears, Roebuck and Co. stores, but Jai Holtz, vice president of financial services for Sears Holdings, says it's still finalizing the time frame. Both Kmart and Sears have charged $5 for an 8-week layaway contract and $10 for the 12-week program.
Kmart's move comes three days after Wal-Mart Stores Inc. said it was lowering its holiday layaway program fee to $5 from $15. It had said that it was reacting to customers' feedback since announcing in July it was resurrecting its holiday layaway program. The new program, which starts Sept. 16 and runs through Dec. 14, will last a month longer than last year's and will include more items than the toys and electronics featured last year. Shoppers who make their final layaway payment will get a full refund of the fee in a form of a Wal-Mart gift card.
Toys R Us Inc. said Monday it was eliminating the upfront service fee for layaway orders created in store from Sept. 4 through Oct. 31. After Oct. 31, a $5 service fee will apply.
Holtz noted that Kmart's decision to waive the fee wasn't in response to other rivals' moves. In fact, Kmart had been testing the no-fee program in 80 of its 1,200 Kmart stores across the country during the past few months, and it had been well received by shoppers.
Given the still challenging economic times, shoppers "are watching the money they spend," Holtz said. "Customers continue to require more value."
Kmart had been testing different options. It had offered a 5 percent discount on purchases set aside for layaway during July and August. The program was "positive," Holtz said. But the company decided to go forward with waiving the fees because it made more sense, he said.
Layaway became popular during the Great Depression. Before the most recent recession, easy credit had made it largely a thing of the past. But when credit dried up and the job market soured, Sears, Toys R Us and other merchants added back or expanded the service. Kmart has offered layaway since the 1960s.
Toys R Us introduced its layaway program in stores in 2009 for bigger items like bikes, swing sets, and play kitchens, and has added more categories each year. In 2011, layaway was expanded to include all items at Toys R Us and most items at Babies R Us.
Citing increased costs and lower customer demand, Wal-Mart phased out its layaway in September 2006 — roughly a year before the recession began — with the exception of jewelry. But the discounter faced criticism because it built its reputation on helping the low-income shopper. It brought back the program for the holiday season last year.