Walmart Kicks Off Holiday Season With Free Layaway

It may be only August, but Walmart already has Christmas on its mind: Today it fired the first shot in the holiday pricing wars by announcing a free layaway program to start next month.

Last year, Walmart Stores (WMT) announced a $15 open fee for its layaway program before lowering it to $5, which would be refunded in the form of a Walmart gift card at the end of the layaway period. This year, Walmart is going a step further by waiving the fee altogether. The program will start Sept. 13 and run through Dec. 13. There will still be a 10 percent down payment and a $50 minimum purchase, as well as a 10 percent cancellation fee.

In case there was any mistaking the significance of the announcement, Walmart made it clear: The layaway program "will kick off the retailer's official start to the holiday season."

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Ditching the layaway fee is partly a matter of keeping up with the Joneses -- the Joneses in this case being Sears and Kmart -- both operated by Sears Holdings (SHLD) -- as well as Toys R Us, all of which already offer free holiday layaway. But it's also in response to Walmart's recent struggles to hold onto its low-income customers, who are most likely to take advantage of the pay-as-you-go option.

As we noted last week following Walmart's disappointing sales report, the retailer is facing economic headwinds in the form of lower discretionary spending. But it's also dealing with the fact that consumers struggling to make ends meet are choosing competitors like Family Dollar (FDO) when deciding where to spend the few bucks they have left at the end of their paycheck. These are the customers most likely to need layaway for their Christmas presents, and if given a choice between a $5 layaway program and a free one, their decision is going to be easy. We'll see if ditching the layaway fee is enough for Walmart to get its mojo back this holiday season.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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