Amazon launches layaway program

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Amazon has announced it is launching layaway, a once-popular way for customers to pay for items they couldn’t afford.

Amazon Layaway will, like programs retailers offered in the 1930s to 1990s, put a product on reserve for a customer in exchange for paying 20% of the product price. This also locks in the price at the time of starting the plan.

Customers then make four more equal payments over eight weeks — one every two weeks. The fifth and final payment will be adjusted to account for taxes, fees and any shipping costs.

The program does not require a credit check to participate and missed or late payments are not reported to credit bureaus, according to Amazon.

Layaway plans do require a valid credit or debit card that will be charged for each payment. Amazon says it will not accept cash or gift cards for payment. Payments will only be handled online; physical locations cannot accept layaway payments.

The program is also only available for items sold and shipped by Amazon and some of those items are excluded for various reasons. Eligible items will feature a “Reserve with Layaway” button on them for eligible customers.

Layaway cannot be used for orders shipping to Connecticut, Illinois, District of Columbia, Pennsylvania, Maryland or Ohio as of April 2022.

Amazon is offering the layaway program all year round, including the holidays and Prime Day events. Customers who miss payments will not be able to put more items on layaway until all payments are brought up to date.

Customers can also opt to pay off the plan early with no penalty.

Layaway plans began popping up after the 1930s Great Depression when cash was tight. It allowed consumers to make payments toward products over time in physical stores. Most stores kept reserved items off the sales floor in a dedicated storage area, which was often located near where customers would go to start plans and make payments.

It’s not immediately clear how Amazon will store layaway items, but given its advanced inventory tracking systems, it’s likely it could simply keep the item where it’s normally stored and its systems would know that reserved items are not available for sale in the case of low inventory.

Layaway programs in retail stores continued to be available into the 1990s and beyond but more retailers stopped offering the option as time went on, mainly because of the rise of consumer credit cards reducing demand for the program.

That said, layaway programs at physical retail stores were still a good option for those with bad or no credit history to still be able to reserve more expensive items and pay over time because most stores accepted cash. While some layaway programs featured additional fees, these often were not as much as credit card interest rates.

Layaway is being offered in addition to Amazon’s exciting monthly payment program, which is the company’s “buy now pay later” offering.

Those payments are spread over five payments as well but charged every 30 days. The monthly payment program also differs in that the customer received the item upfront — and is essentially paying off an unsecured loan for the product price.

Like layaway, Amazon says it does not use credit reports to determine eligibility for the monthly payment plan, but does look at factors such as item price and order history to determine who can use it and on what products.

Both of these programs appear to be in response to the growing popularity of BNPL that many online retailers see a way to generate more sales, especially on more expensive items. Companies such as Klarna, Affirm, Quadpay and AfterPay are some such of the names competing in the space.

These companies generally make money by charging the merchant a fee, often percentage based, on top of any regular processing fees. Most of these services also release funds to the merchant immediately and take on the debt and responsibility for collecting it.

Some of these providers have expanded to offer the service at retail stores.

There is also the possibility that as the prices of many products continue to rise due to inflation and supply and demand fluctuations, these options could become appealing to more consumers.