A retailer called me Friday last week to discuss LayBy options. They are finding it tough to compete in the toy space with majors and they are considering offering interest free LayBy run and managed in-house.
Their plan was to offer free LayBy for items over $100.00 and to give customers up to December 24 to pay off the purchase.
Once I explained to them their retailer obligations in relation to LayBy they were having second thoughts. Their plan was to have rules in place ensuring they would be paid un full by December 24 regardless of whether the customer collected the goods. The ACCC website has something to say about this. Here is their text re termination fees:
You can only charge the customer with a lay-by termination fee if they cancel the agreement.
There is no set amount or percentage for a termination fee, but it must not be more than your ‘reasonable costs’ relating to the lay-by agreement (for example, storage and administrative costs that apply to the lay-by agreement). What is ‘reasonable’ will depend on the circumstances and you should be prepared to justify that your costs are reasonable.
If the customer’s lay-by instalments do not cover the termination fee, you are entitled to recover the outstanding amount as a debt. This should be clearly stated in the lay-by agreement along with any other details of termination fees so that your obligation to have a transparent lay-by agreement is fulfilled.
Apart from the termination charge, you are not entitled to damages or any other remedy for the termination of the lay-by agreement.
Shoppers are knowledgable. There is no dodging the rules on LayBy.
I don’t see the value in an interest free LayBy offer. Unless people have skin in a transaction they don’t as connected with or obligated to the purchase as I would like.
Making it easy to get a signature on a piece of paper is not a smart move in my view. The more important focus should be on getting a firm commitment, a full purchase. you do this through product knowledge, customer service and adding value. It is the adding value in the toy space especially that is hard … but it can be done. You have to be a smart retailer to do this.
Major big-business competitors are not smart, that is why they go with interest free and similar deals as that is all they can offer.
I urge small business retailers to not get lured into that mugs game. There is no good news for the business.