Tucked away in the back of the Kmart store on Manchester Avenue is a little room that is marked "layaway."
The term may conjure up images for some of a hardscrabble life from the Great Depression, but the traffic to this part of the store has been picking up in recent years.
Dana West, 29, a grocery worker, headed there on a recent day to put a down payment on about $40 worth of holiday gifts — shirts and sweaters for her godson and niece.
"This way I don't have to dip into my budget," said the Maplewood resident. "And I don't use credit cards for the holidays. I learned that the hard way."
It's no coincidence that layaway is making a comeback this holiday season. Some surveys show that cash-strapped consumers expect to spend about the same or a little less than they did last year, said Megan Donadio, a retail strategist for consulting firm Kurt Salmon.
Overall, most holiday shopping forecasts predict a 2 to 4 percent bump in sales this year after a 5.2 percent increase last year.
"It's all about knowing there is a limited pie of dollars out there," she said. "Retailers are going to do whatever they can to make it easier for the consumer so they have a better chance of grabbing some of those dollars."
At first blush, the resurgence of layaway among retailers might not appear to be a great omen about the health of the consumer in 2011. But experts say it is actually a good sign that consumers are looking for ways to live within their means and not racking up a lot of credit card debt.
The return of layaway also shows the power that consumers hold with retailers, said Richard Feinberg, professor of retail management at Purdue University.
"They have been asking for and voting with their dollars by going to retailers who offer layaway programs" or rock-bottom prices, such as dollar stores, he said. "So the larger retailers have been forced to respond. They can't afford to give up on any consumer any more."
Layaway continues to be a popular option at Big Shark, a local bicycle store chain. Owner Mike Weiss said it's especially so at the location on the Delmar Loop compared with his Chesterfield store.
"It seems based on the economics of the area," he said.
But he also has been seeing seemingly more well-off customers who are also using layaway to buy more expensive bikes.
Wal-Mart reintroduced layaway this year after discontinuing it in 2006 at a time when the credit was still readily available and consumers were less cautious about accumulating debt. Toys R Us also recently expanded its program to include all products this year after bringing layaway back in 2009 for big-ticket items.
And Kmart and Sears have revamped their programs in the last couple of years to include online payments and a 12-week option instead of just an eight-week program.
Layaway allows customers to reserve an item while make payments until it is paid off, at which time they can take it home. No interest is charged on the purchase, but there are often service and cancellation fees associated with it.
Matt Arnold, a retail analyst with Des Peres-based Edward Jones, said Wal-Mart's decision to bring back layaway was largely driven by customer feedback. It's one of a number a ways that Wal-Mart has been reversing some of its decisions in recent years that have alienated its core customers from modest incomes, he said.
"I don't expect this to be the event that turns the tide for Wal-Mart," he said. "It's just a reflection of them getting back to their roots."
Sears and Kmart never did away with their layaway programs. But they launched an awareness campaign to highlight them in 2008, said Salima Yala, vice president of the layaway division for Sears Holdings. Since then, the company has seen its layaway volume double.
"Customers are coming to understand it's not a tool of the past," she said. "It's a legitimate financing tool."
Another perk of layaway programs is that they allow customers to reserve some of the season's hottest toys and electronics that might not be available closer to the holidays.
Power wheels, video game consoles and swing sets are some of the most popular items put on layaway at Toys R Us, spokeswoman Katie Reczek said in an email.
But consumers should be careful when signing up for a layaway plan. Back in the 1970s when it was fairly popular, layaway was one of the top five complaints to state attorneys general, Feinberg said. But in general, consumers can avoid most problems by reading the fine print of the layaway contracts and making sure they make their payments within the allotted time, he said.
The Better Business Bureau advises consumers to ask retailers questions about when the payments are due, whether there are storage or service fees, what happens if a payment is missed and whether they can get a refund after making just a few payments.
There also are risks for retailers. On top of the administrative costs, there is the chance the consumer will end up canceling the order and the store will have to find another buyer.
"The whole point of retailing is to sell it," Purdue's Feinberg said. "If a consumer decides not to buy it, then they have to sell it again. Retailers would rather not have those concerns or problems. But they're doing it because they want to capture every sale they can."
Michael Bradley, vice president of Hub Furniture & Appliances in Soulard, has seen an uptick in layaway this year. He estimates layaway makes up about 10 percent of the store's transactions.
While some other stores have abandoned their programs, he said his company has stuck with it because it doesn't want to lose those customers who need it.
Still, the store retooled its layaway plan a couple of years ago, adding a four-month program with no fees and adding a $20 service fee to its nine-month program.
"That way things aren't spread out for too long," he said. "It's kind of labor intensive to store the merchandise."