Kmart’s Hot Xmas Idea: Layaway

Kmart’s big idea this holiday season is an oldie, but maybe a goodie: Layway. In mid-October, the chain began advertising, via DraftFCB, Chicago, its service, which lets consumers pay for their holiday purchases over time. Layaway first became popular during the Great Depression, but lost favor in the mid-1990s as consumers chose to rack up bills on their credit cards instead. Though Kmart has continued to offer layaway over the years, this is the first time it has played it up so big in its holiday advertising. The primary appeal with layaway is the lack of interest: Consumers who buy gifts on layaway now at Kmart can do so with 10 percent down plus a $5 one-time service fee, and a promise to pay the full amount over the next eight weeks. Kmart CMO Mark Synder said the idea is catching on and underscores Kmart’s brand essence as a “smart” alternative to Wal-Mart and Target. Snyder, the former svp, global brand management at Holiday Inn, who joined Kmart in September, spoke with Brandweek editor Todd Wasserman about how he sees layaway as a key differentiator and how Kmart’s ad spending may be affected by “limited resources” in 2009.

Brandweek: The holiday season is now upon us; how does it look from your point of view?
Mark Snyder: I know this is weird for a retailer to be saying this, but I’m very encouraged. And you can sum up the reason why in one word: Layaway. It wasn’t a new offering for Kmart. Kmart has had it as its core value proposition for the past 40 years, but this year it was obvious that where the economy was heading and the concerns that our shoppers had about being able to give a great Christmas to their families this year. They were looking for options that would help them budget better and layaway turned out to be the thing that was most interesting to them, most compelling.

BW: And so you see that as a key differentiator for Kmart this holiday season?
MS: It absolutely is. Target doesn’t have it, Wal-Mart stopped doing it—those are our top two competitors, so I’ll just call that out. For us to lead with that message, we know for sure from the data sources that we have internally plus the anecdotal evidence that’s been showing up in the media, on broadcast particularly—we have over 111 million impressions now—that customers who haven’t used us in a long time are becoming customers and customers that have never used us are becoming customers because we have a way to help them manage their budgets for the holidays.

BW: What are the other ways to get people in the stores? Is there a category that’s particularly hot this year?
MS: We’re certainly seeing great traction in home electronics. Toys, particularly, is way up over what it’s been in previous years and apparel, particularly kids’ apparel, are the top three categories that are driving the success that we have in layaway. I was in Allentown, Pa., last week and I asked them to take me back and show me the layaway process, how it works, how it’s organized, how they’re getting ready for the big day when they start to hand this stuff out. It was amazing to me how much of those categories were in the storerooms back there [customers have the option of keeping their gifts at the stores to discourage peeking at home]. If you’ve seen the advertising, we’re doing a great job of driving those three categories as well as the brand names that help drive them.