Toys "R" Us and Walmart battle for layaway dollars

Toys "R" Us enhanced its layaway program by dropping some fees and Walmart quickly responded.

Toys "R" Us dropped the $5 service fee and minimum purchase requirement from its layaway program in a bid to capture sales of those who begin their holiday shopping early.The company said it changed the rules for its layaway program, instituted in 2009, to waive the $5 upfront service fee and eliminate the minimum purchase requirement for all orders created in stores through October 31.

"Providing our customers flexible payment terms, without requiring an upfront service fee, is our most attractive layaway offer yet," said Troy Rice, EVP of stores and services for the 875 store U.S. division of Toys "R" Us U.S. "We continue to look for ways to help our customers stretch their budgets, and by taking advantage of this free layaway option, they can make a series of small payments over time, as they begin to think about what might be on their children's holiday wish lists."

After October 31, the company will charge the $5 fee and other rules will continue to apply. For example, regardless of when the order was created, there is a 20% down payment requirement and shoppers have 45 days from the time the order was initiated to pay for at least half of the their order. Orders must be paid in full by and picked up by December 16 or there is a $10 cancellation fee.

Modification of the layaway program follows a move announced by Walmart in late August to move start date of its layaway program up by 30 days to September 16. As for fees, at that time of the announcement Walmart had increased the fee to open a layaway account to $15 from $5 last year, but hours after Toys "R" Us announced its program, Walmart said it was "rolling back" a fee it had yet to begin collecting to the $5 level.

"This is a direct response to feedback we received since announcing this year’s holiday layaway program," said Duncan Mac Naughton, Walmart’s chief merchandising and marketing officer. "Customers who make their final payment will receive a refund of the $5 fee on a Walmart gift card. We believe this rollback strengthens our layaway offering. It’s even more attractive to our customers and makes Walmart more competitive in the marketplace."

Other terms of Walmart’s program are comparable to last year such as a requirement for a down payment of $10 or 10% of the purchase price, whichever is greater, but the company no longer collects a cancellation fee of $10 as was the case last year.

The biggest difference in the programs at the two retailers is the categories of merchandise eligible for layaway. All toys in its Toys "R" Us stores and most items at Babies "R" Us store are eligible for layaway, in comparison to when the program was first launched and merchandise categories were limited to large items such as bikes, swing sets, dollhouses and play kitchens. Since then, additional categories of merchandise were added such as video game hardware and tablet computers and last year saw expansion to virtually all merchandise categories. Excluded from the program are categories such as batteries, diapers, candy, food and formula, some seasonal items, health and beauty aids, apparel and doorbuster deals.

At Walmart, the list of merchandise categories was expanded this year after the program was reinstituted last holiday season. Walmart has added small appliances and select sporting goods such as basketball goals, trampolines and large exercise equipment to electronics, toys and jewelry as categories eligible for layaway.