Creating a Layaway Plan
A layaway plan can be the best service your store offers. If properly established with simple procedures, it is a real profit center for add-on sales. Handled poorly, it can be the worst program you implement. The most effective layaway is well organized yet has guidelines that may be easily altered to meet special needs. Hopefully, this article will point out areas where one should be cautious.
Make sure the layaway agreement clearly spells out what the required monthly payments will be. Many stores are too flexible in this area, allowing payments to be missed, which hinders cash flow. When a customer forgets a payment, send postcard reminders that a layaway payment is needed. Every payment brings your customer closer to ownership of the inventory committed for them. In addition, trips to make payments translate into additional sales.
The biggest benefit of a layaway plan is that most customers will stop shopping for an item and a store once a layaway is established. Although, you will have the exception of someone who continues to shop for a better price. This will not happen very often, but when it does, verify the lower price, honor the difference, apologize, and gladly give your customer a credit for the difference. Use this feature as another reason why your customer should commit to using your layaway; they can't get hurt, and neither can you. Better retailers use signs guaranteeing they offer the lowest price or they will match the difference and give you an additional credit for the difference. This is no more than a marketing technique to set your customer's mind at ease that your store has the lowest prices.
Special orders and layaways can supplement your stock orders and, when planned properly, can help towards better freight allowances. Don't underestimate delivery dates! Just because a customer may have delayed placing their order with you doesn't mean you can get it any sooner.
Be up front with your customer, tell them if you will not hold inventory in stock until a certain amount of money has been paid down on the layaway, but hold the price. Write on the initial layaway what the expected pick-up date is and the likelihood of all the items being available by the pick up date. This will save you from losing sales to walk-in customers because you have inventory tied up for months without knowing when a customer is going to pick up their goods. Be careful, nothing will annoy your customer more than if they come to pick up their order and you do not have it complete. Accurate records warning you when items should be ready for pick-up are very important. If you have ninety percent of a layaway complete two weeks before it's scheduled to be picked-up and suddenly there is a back order on an item you need, most customers will understand if you call them early to explain the situation before the scheduled pick up becomes a disappointment.
Most problems arise because of poor communication. Keep your customer informed - especially if there is a problem or delay. Call them to explain before they call you looking for the item. Keep loaner items available in case an item does not come in on time. You can substitute with a similar product until theirs arrives. Have your customer sign a receipt stating they have picked up their layaway. If you exceed your customer's expectations, you will inevitably have a pleased customer.
Special orders are often confused with layaway, so make sure your customer is aware of the difference. Be happy to accept a special order from a customer as this is a service many major competitors will not offer or have very strict terms about. It is imperative, however, that your customer understands special ordered goods are non-cancelable. Many stores are not clear with this procedure, and it can be disastrous if your customer does not agree to this. Explain that you have many other goods that are available for them if they are not certain of what they want, but you want them to be very clear that you do not choose to carry or stock that item. Special orders are not cancelable or returnable under your normal store policies. If you are not clear pertaining to special orders, you will either have more unhappy customers than you can imagine or happy customers and a store full of items you can't sell except as one-of-a-kind mark downs or floor samples.
Signage is an additional area that needs detailing in your store. Many major competitors do not offer layaway and, even if they do, it is not usually as flexible to be customized to meet customers' needs the way that yours can be. Make sure you have professional looking signs clearly citing the advantages of your layaway program. Display signs on high priced ticket items such as cribs or strollers ("$25.00 down will layaway this item" or, "$100.00 down and five additional payments of $75.00"). For many people this will end the search for their nursery products.
Some tips to help keep a layaway profitable
Keep good records. In "off times" check to make sure that layaways are accurately marked in the warehouse. If possible stack layaway items together in the warehouse separating sold goods from available goods. Place small items in a box or bag, write the items enclosed on the box and seal it. Check that you don't have items marked for customers who have already picked up. Sometimes it is easier to give the customer a crib or chest close to the loading dock door versus the one marked in layaway. Make sure to update your layaway inventory regularly. It will also be helpful to put the expected pick up date along with the customer's name and slip number on the box.
Many times a customer is just not ready for their goods when initially projected (this is usually the only time you have a complete order). Either the room is not finished, the carpet man has not come yet, Dad hasn't painted the room, or Mom hasn't picked the color. Be reasonable and work with your customer; they will appreciate your flexibility. Tell them you can hold it as long as they wish (assuming it is all paid off).
Occasionally, when a store has a cash flow problem, the layaway is the culprit. Let it work to your advantage. If you need cash, offer free delivery to a customer with a large balance if all of their order is complete. Or if things are really tight you may offer an incentive such as a five percent discount if the layaway is paid off before a certain date. Explain that you are really short for space in your warehouse and need the room so your store is offering this incentive to customers if they help you relieve your overloading.
Finally, when your customer has had a positive experience and picked up their nursery layaway, send them a reminder to place a high chair or car seat on layaway. Maybe they can start a layaway on another chest, night stand, mirror, or other furniture to help complete their child's room for the future. Remember, the customer who has committed to your layaway is a bird in your hand, not still in the bush. Treat them honestly and fairly and you should have a customer for life.