For some it might still have a ‘mumsy’ or ‘poor person’ stigma attached, but the layby is becoming more and more accepted as a way for credit-shy (or already in debt) consumers to pay for the things they want and need without going into the red, or sacrificing too much else. In fact it’s part of a lot of sensible financial advice tombs too. It still isn’t openly encouraged at major department stores, but both Myer and David Jones do offer it as a payment option.
Case Study – David Jones
David Jones was heavily criticised in online forums after it raised its layby fee to $10 in 2003, but that just proves that there were customers who relied on it as a way to pay for things they might not otherwise be able to afford. It’s also worth asking why neither store has stopped offering layby as a payment option.
Within the world of small business, boutiques and online retail it seems layby is also coming back into fashion, and big businesses are noticing. The Big Day Out music festival copied another popular festival, Future Music, and offered layby as an option for concert goers on a budget for the first time this year. The organisers told the media that it was introduced due to ‘overwhelming consumer demand’ too.
Small Business and Layby’s
It’s not surprising that in these economic times, when consumers are looking for ways to control their spending, and credit card use, layby has come back onto their radar. It holds few nasty surprises from the customer perspective as administration fees are usually low, the only risk is losing the deposit already paid and repayments are interest free (by law). The fact is layby can make good business sense too.
An online gift retailer, Cool Things, recently became one of the first online stores to offer its customers layby online. The online version comes with enhanced customer service too, and owner Peter Harback has taken it to the next level by ensuring that every layby customer gets a follow up phone call to negotiate the payment plan and confirm all the terms and conditions the customer is signing up to. Small business owners and operators would do well to take note, and consider offering layby, including layby online. According to Harback most customers who use layby pay it off automatically using their credit card, and the admistration costs are minimal.
The Australian Retailers Association (ARA) also reports that defaults on layby across the country are minimal, and the ARA website has a very useful software package for businesses wanting to offer layby to customers. It allows them to keep track of repayments and customer details and manage the financial impact of offering layby.
In fact, Harback says that layby customers fill their online shopping carts with goods worth as much as 100% more than usual credit card customers. That means the process works for the business as well as the customer and transactions are worth more – at least that has certainly been the case here.
If you are thinking of offering layby – or advertising it if you do already offer layby, you will want to make sure that you’ve included these terms and conditions on the receipt you give to customers:
· The 20% (or similar) deposit amount
· A statement that full payment is due within X number of months (usually within 3)
· A costing charge for layby not completed
· Any cancellation fee that would apply if you decide not to go ahead
· A statement that the deposit won’t be returned if the layby is cancelled
· Progress payments, preferably with dates. Payments will usually be required weekly or fortnightly
This article was supplied by www.creditcardoffers.com.au