retail news in context, analysis with attitude

The Wall Street Journal had a story the other day about how a growing number of consumers are using financing plans to buy small, everyday items … a marked change from how they used to use such services.

According to the story, "Gone are the days when special financing plans were mostly reserved for big-ticket purchases like TVs and refrigerators. Now, sweaters, makeup or other everyday items can be paid for in installments with loans or other payment plans offered at checkout with thousands of merchants in the U.S., including Walmart Inc., Urban Outfitters Inc. and, soon, H&M. Some Inc. credit-card users can also sign up for these plans."

The Journal writes that "the payment plans often resonate with young adults who are wary of carrying credit-card balances after watching their parents struggle with debt during the last recession. Financial technology companies such as Affirm, Afterpay Touch Group Ltd. and PayPal Holdings Inc. dove into these payment plans after that period, when banks pulled back on consumer lending."

The fact is that "merchants and lenders are tapping into the financial challenges many U.S. families are facing. Despite signs of a strong economy, like low unemployment, consumers are increasingly relying on borrowing to fund their daily lives. U.S. consumer debt is higher than ever, as cars, college, housing and medical care grow more expensive but incomes stay largely stagnant."

One difference from traditional layaway plans is that you don't have to wait until the item is paid off to get it; you make monthly payments with a fixed end date, and also pay a late fee if you are tardy.
KC's View:
Two things about this story.

One, it is heartening that consumers, especially young ones, are looking to find ways to make sure they don't ring up credit card debt … though it may be a little illusory, since they are, actually, going into debt.

And second, this story suggests that maybe the economy isn't the purring machine that some suggest … that there is a lot of financial insecurity out there.

Retailers need to pay attention.