Walmart’s Online ‘Pay with Cash’ May Offer Game Changing Advantages

Last year this space featured an Insight titled, How Walmart’s Scattered Merchandising Policies Helped Save Kmart.  The piece noted Walmart’s then recent decision to imminently reinstate its long abandoned layaway program for the upcoming holiday season.

Walmart had dismissed its traditional layaway policy in 2006 despite the cries of many customers who strongly wanted to continue to take advantage of the program and industry experts who wondered if this would force a significant number of loyal customers to seek other retail options for their all-important holiday gift giving.  At the time Walmart indicated that the popularity of credit and debit cards along with very profitable gift cards made layaway obsolete.

This opus proved to be music to the ears of competing retailers, most notably the long struggling Kmart.  On Walmart’s announcement of the withdrawal of its layaway plan, Kmart promoted its determination to extend its layaway policy to its customers with no end in sight.  Despite Kmart’s struggles to be relevant, the retailer has at times successfully managed to attract niche groups through specific marketing appeals.  Layaway was one such successful project which actually gained Kmart the loyalty of the many consumers who saw layaway as a holiday gift-giving Godsend.

At the same time Kmart’s early use of the Martha Stewart phenomenon brought the company a cross section of loyal shoppers.  Since dropping Martha Stewart the company has sought to attract the Latina consumer with Martha Stewart-like promotions involving collections based on Latina stars, most recently featuring Modern Family and commercial phenom Sofia Vergara.

The retailer also launched a first of its kind, fully customized YouTube channel in Spanish. The channel consisted of novelas or soap operas that include an end story.  The first was called Madres y Comadres. The series focused on two Latina women and the challenges they face raising a family in America while enjoying their Hispanic culture and maintaining their family heritage.

There is no question that Walmart’s dismissal of its layaway program significantly boosted Kmart’s meager fortunes.  At the same time losing the program did little to enhance its reputation with the ever growing legions of shoppers pledging loyalty to aggressively expanding and now recessionary visionary dollar stores.  For well more than a decade Walmart had reluctantly admired dollar retailers as they consistently gained market share and expanded product appeal and offerings through good economies and bad.  Dropping layaway was seen as antagonistic by many shoppers as expanding grocery offerings at dollar stores was viewed with great favor by many of these same people.

Now Walmart has begun to initiate a brand new program which observers see as a positive to many of those customers Walmart has tried to woo back by reinstating layaway and announcing an overall drop of grocery prices.  Walmart has become the first retailer to launch an online “Pay with Cash” service that offers cash payment options for orders at Walmart.com in the United States.

Walmart is the first major retailer to offer online purchases without the need for financial services or a credit, debit or prepaid card.  Since the majority of Walmart’s in-store transactions are paid in cash or cash equivalents such as debit cards (only about 15% of its transactions are paid through credit) the company expects its Pay with Cash program will allow the same payment options online, which is expected to appeal to a large portion of the company’s customer base.

The Pay with Cashoption, allows an online shopper to place an order on walmart.com and, during checkout, select the “Cash” option and a shipping preference. The customer immediately receives an order number on the order confirmation and an email receipt of the order. The item is reserved in the system.  The customer then has a 48 hour window to bring the printed order to any cash register at any Walmart store or Neighborhood Market.  Once cash payment is completed in the store and received, shipping then occurs via Site to Store or to a requested address.

In addition to the Pay with Cash program’s obvious appeal to the many who lack credit or are suspicious of the perils of overindulging one’s card, the Pay with Cash program could prove to offer a great side benefit.  Retailers are increasingly stressing as they worry that smart phones and devices are rendering their stores virtual showrooms for Internet-based retailers.  Programs such as Pay with Cash and free site to store shipping could add a great vitality to the importance of visiting and actually receiving product at the store level.

Competitors, most notably Target and Best Buy, have been publicly stewing as they increasingly sense that consumers regard their big boxes as pretty much showrooms for Internet-based competitor’s pricing tactics.  It is likely that Walmart’s attempt to appeal to credit challenged and cautious customers will actually increase its customer base while reinvigorating the attraction and relevance of actual store visits.  No doubt, a store visit to pay for or pick up an online transaction should often lead to additional in-store purchases of related accessories, needed groceries or a few impulse items.  Such a result would put the importance of the actual big box back on the map.