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shunning the credit card

In December, as the economy was plunging faster than the temperature, Jason Swetnam went out to buy a bicycle, and the fact that he wasn't ready to pay for one was not going to stop him.

Mr. Swetnam, a 36-year-old high-school teacher in Toronto, made the store manager a proposition: In exchange for a $200 deposit, would the store hold the $800 bike for a few months as Mr. Swetnam paid it off in instalments?

In essence, Mr. Swetnam wanted to know, could he buy the bike on layaway?

A few years ago, layaway might have struck most people as an outmoded way of purchasing goods, but it's enjoying a resurgence thanks to a slumping economy and what experts say is a shift in consumer psychology.

As Oprah Winfrey said on her show last fall: "Remember layaway? That is where we are heading."

The era of put-it-on-credit-and-forget-it is over, experts say, with consumers seeking out options that don't involve onerous interest charges.

The new era is, 'I'm going to be a little more cautious,'" says Alan Middleton, a marketing professor at York University's Schulich School of Business. "Up to this point, it was 'Charge it on the card.' But people are now really beginning to look at their monthly bills as they come in and they're saying, is there another way?"

For some, layaway, which allows people to purchase an item in increments after paying a small deposit, has become that other way.

Its resurgence began last year as the economy began to decline. With retailers fearing low holiday sales, some introduced layaway programs as a way to entice shoppers. In the United States, Sears introduced a layaway program for the holidays that proved so popular the company decided to extend it indefinitely.

Sears reasoned that "this is going to help our customers who may not have access to credit or who may choose not to use credit as much," says Don Hamblen, Sears's chief marketing officer. "I think people have a newfound sense of living within their means."

Other large retailers offering layaway programs include Kmart, Burlington Coat Factory and T.J. Maxx.

In Canada, everything from bike shops to jewellery stores to kayaking tour operators are offering layaway programs. (Sears has no plans to make layaway available in Canada, however.)

Doan Galarneau, owner of The Cyclepath, a bike store in Calgary, says layaway sales are up 10 per cent this year.

"It's really popular, especially among the younger demographic," he says.

A new generation may be discovering layaway, but it is hardly a new option. Popularized during the Depression, layaway remained a widespread practice until credit cards flooded the market in the early 1980s.

It is now attracting a much broader audience.

"Historically, layaway was designed for people on low incomes," says Ludwig Bstieler, associate professor of marketing at the University of New Hampshire Whittemore School of Business and Economics. "In times like these, it adds an additional layer of consumers," he says.

And layaway is cropping up in unlikely places. This year, for the first time in its 10-year history, the Coachella Valley Music and Arts Festival in Indio, Calif., offered the option. Organizers of Bonnaroo, another popular music festival, also offered a layaway program after success in previous years.

"[It was]simply an acknowledgment that many of our fans are in college, maybe on a tight budget, and we wanted to make it as easy as possible for them to purchase tickets without having to absorb the ticket price in one lump sum," Ashley Capps, president of A.C. Entertainment, which produces the festival, told Billboard magazine earlier this year.

The Internet is also helping to spread the appeal of layaway. The site allows people to pay for their vacations in instalments. There is even a site,, that lets parents buy diapers on layaway.

Indeed, the rise of layaway can be tracked by following the success of, a Florida-based company that allows users to buy goods and services on layaway from more than 600 retailers.

When the site was first launched in 2006, it was difficult to attract customers, says CEO Sergio Pinon.

But, he says, "last year, when the economy really started to tank and people were looking to layaway as an alternative … we saw considerable growth."

Mr. Middleton says consumers should inquire about layaway options even at stores that may not have a program in place.

"A retailer by definition has high fixed costs, so anything you can do to maintain a pattern of purchase and do so over time is going to help them," he says. "It's a way of keeping the customer engaged when they might not buy right now."

As for Mr. Swetnam, he picked up his bike in February and took it home knowing he didn't have to worry about seeing it on his credit-card bill. It was a sweet ride.

Special to The Globe and Mail

How layaway works

Layaway plans usually require you to pay a deposit ranging from 10 to 25 per cent of the cost of an item, then pay the rest of the price in instalments. The store holds the item until the full price has been paid, usually a few months later. If you default on a payment, expect to kiss that deposit goodbye. But while there is always that risk, buying items on layaway has the advantage of letting you pay the same amount over a long period as you would up front.

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