The layaway model gets a modern upgrade

Modern young consumers are conditioned to expect instant gratification in many areas of their lives, from the entertainment they consume to the transportation they take. As they’re used to getting what they want when they want it, they’re turning to new layaway programs to buy everyday items immediately without needing to have all the funds upfront.


As discovered in our upcoming Generations Report, launching March 28, one in five Millennials have used a payment plan (e.g., layaway program). In the past, this purchasing model was typically available for big ticket items, such as electronics and appliances, but modern young consumers are increasingly using it for smaller purchases too, such as sneakers, jeans, or beauty products. Afterpay is one such service that lets shoppers pay in installments at numerous youth-focused participating retailers, including Urban Outfitters, Steve Madden, and Forever 21. For instance, a shopper can buy a $100 dress by paying $25 upfront and then $25 every two weeks until paying off the total, with Afterpay charging retailers 4-6% of every transaction.


Millennials often splurge on big ticket experiences such as travel, live events, and meals, and are strapped for cash afterward. Affirm is a layaway program that helps alleviate this problem by letting shoppers purchase items in small increments. The San Francisco-based startup, launched by PayPal co-founder Max Levchin, is available at a variety of retailers, including Warby Parker, Flywheel, and ThreadUp. Consumers simply apply online or via app and instantly learn if they’re approved, then when shopping at participating retailers they can click a button at checkout. Similar to Afterpay, Affirm charges retailers a fee or consumers interest.


Peer-to-peer payment services like Venmo have made young consumers accustomed to being able to pay for something when it best fits with their finances. Consider how they can keep a charge pending for a few days until they get paid or until they receive payments from others. It follows that they’re seeking the same flexibility from brands as they do with friends. The app Fenqile, which means “happy installment,” offers this ability to consumers in China. As high property prices leave people with little discretionary spending, they’re increasingly embracing layaway programs for smaller purchases such as movie tickets or snacks. As of September, Fenqile had 32.6 million users.