Widely considered a relic of retailing, layaway has found new life in the U.S., as cash-strapped consumers look for alternative ways to purchase goods. But will the old-is-new-again way of shopping lure more people into Canadian stores?

In October 2008, Kmart—which ceased to exist in Canada in 1998, when its stores were purchased by HBC and subsequently rebranded as Zellers—launched ads to promote its layaway option. And in November, Sears Holding Corporation, Kmart’s U.S. owner, announced that Sears stores would also offer the service.

“Based on consumer response in-store at Sears and Kmart, they decided to reintroduce [layaway] for holidays,” says Beth Pagano, a PR representative for Sears.

Originating in the Great Depression, layaway gradually disappeared as consumers were increasingly able to obtain big-ticket items like appliances and furniture right away with credit cards, rather than waiting while they paid in installments.

“With the credit crunch in the States, people either don’t have credit cards, their credit cards are maxed out, or they don’t have a lot of available cash,” says Charlene Hill, chair of the School of Business at Capilano University in North Vancouver. “If they want to purchase something… what else can they do?”

Elizabeth Evans, director of the Ted Rogers School of Retail Management at Ryerson University, adds that the return of layaway mirrors a shift in consumer psychology. “When people genuinely want something but don’t want to go into debt, [they can] use layaway as… ‘forced savings.’ ”

Other big stores haven’t joined Sears and Kmart, however, and Evans doubts they will. “Major retailers that might engage in this type of program would be the Wal-Marts, Targets or other big, mass-merchant discounters. They’re not likely to because they price their products differently. They’re looking at offering everyday value and have set up other forms of credit.” (A Wal-Mart spokesperson confirms the company discontinued layaway in 2006 and has no plans to bring it back. Calls to a sample of Canadian stores showed that layaway purchase options have been phased out in the past six months.) Layaway can be costly for retailers when customers change their minds or fail to pay.

Sears’ program was only available from Nov. 14 to Dec. 23. The down payment ($15 or 20% of the purchase price, whichever is greater) had to be in cash, although subsequent payments could be made in other ways, including Sears charge cards. Several items were not eligible, including appliances, electronics and computers.

In Canada, Sears instead offers an interest-free, equal-billing plan, which was advertised in December. Customers with a Sears Card or Sears MasterCard can pay monthly installments, plus a billing or deferral fee, for items such as appliances, mattresses and water heaters, and they get their purchases immediately.

The Canadian financial situation is less bleak, so retailers haven’t needed to stimulate spending with new (or old) financing vehicles. Nevertheless, consumers’ mindset is changing.

A year ago, people would have been bemused at the idea of layaway, but now it seems like a sensible option.

“What we’re seeing is a reflection of consumers starting to think about how they spend their money, how they budget and handle their finances,” says Evans. “We’ll probably see more… resurrecting of old concepts in new ways as we work through what are some pretty unusual and different economic times for most of us.”