Monday, April 14, 2008

Sales: Likely garbage

Often a slave to the retail industry since I first stumbled into the adult world, I've come to the frank and sudden realization that sales and rebates are almost always bad things. While hardly ever bad for the retailer, the consumer is all too often lulled into a false sense of self satisfaction before being clubbed in the back of the head with hidden fees, costs and other money grubbing garbage. While it's to be expected that retailers should try to improve their bottom line at all costs in order to remain in business, all too often is the consumer's ignorance preyed upon.

Let's examine a fictional chain of businesses. We'll call this national franchise Bob's Appliances. Bob, the owner of this franchise doesn't actually produce anything. He doesn't need to. The service his corporation provides is customer service, product knowledge and the convenience of having sixty blenders under a single roof for you, the consumer to gawk at and wonder which will produce the best milkshake.

So Bob purchases all of his wares directly from the manufacturer in large quantities. The manufacturer, knowing that Bob will sell through his stock quickly and place another order will provide him their merchandise at a fixed cost. Bob will then mark up the sales price so that when he sells a blender he'll be able to pay for things like shipping costs, rent and his vacation to Greece.

Which is understandable. Bob needs to do this in order to stay in business and pay his employees. But let's say Bob gets some competition. Larry opens up a rival appliance warehouse down the street and starts offering his blenders at a cheaper rate than Bob. He does this because he's a prudent business man.

He does, after all want to make a living. He needs to put his kids through college and pay for his wife's new rose bushes. Bob, worried about his own savings account starts dropping the prices of his blenders to compete with Larry's.

This all sounds great for the lucky sod who wants a cheap blender. But it's not terribly good for Bob and Larry. Soon they're selling blenders for pennies above the prices they originally paid for them. The manufacturer, worried that Bob and Larry are going to drive one another to the poor house and leave them with no middle man to peddle their blenders is left with only one recourse. They set certain guidelines their merchandise can be sold with. They politely inform Bob and Larry that unless certain conditions are met, they're going to stop selling to them.

This is where the manufacturer's "suggested retail" comes in. Suggested retail is, simply put the lowest any given item can be sold under normal circumstances and most major manufacturers practice this sort of behavior. Cusinart, All Clad, T-Fal, Krups, Euro-Pro, Kitchen Aid, Yankee Candle, et cetera.

This provides a boundary for Bob in the future. He knows that his competition can only go so far with its prices, which were kindly set by the manufacturer to assure that even at the minimum sales price some profit was to be had.

This balances things out a bit. But it opens up a whole other world of pain. Just how far should Bob set his prices above the "suggested retail" given to him? Twenty percent or five? Well, nine times out of ten it'll depend on what exactly Larry the devious competitor is up to. Which is probably a sale.

Sales do not break all the rules. They simply create the illusion of such. There are still price guidelines in place you just don't see how little retailers pay for the items they are reselling for you.

Imagine seeing a blender that's usually sold at Bob's for $100. But this week it's only $30. How can Bob possibly profit from this? Simple. He bought it for $5 and jacked up the price to make it seem like he's taking a loss by "practically giving" the blender to you. The suggested retail? Oddly enough, it's $20.

The biggest question I get asked is "When will this item be on sale?" The retailer I work for is thankfully somewhat sane, so my answer is always "Never. We have 'every day' low prices." Which sounds corny and makes people think they're being ripped off, but it couldn't be further from the truth. Sales create an atmosphere of misinformation about the actual value of a product. You shock the person with a borderline crazy high price and slap a sticker on it saying you're going to be a real swell person this president's day weekend and sell it for a quarter of that.

Not only is this manipulative, but in my opinion outright despicable. Especially when retailers go into overdrive and make it their business to have sales. They'll simply hold a sale every month and jack up their prices astronomically high the rest of the time. A prime example of this is Macy's and Kohl's. Not only does this make it impossible to shop when a sale isn't around, it also makes it impossible to shop when there is, simply due to the fact that it herds customers like cattle through the front door all at the same time.

The only exception to this it honest clearance sales after big, time sensitive events. Retailers are still making a profit on every sale, but they're genuinely motivated to move the product so they can make room for higher ticket items. This is why buying Christmas decorations on December 27th is smarter than December 1st. Or purchasing a humidifier in the middle of April is probably wiser than January 5th.

I'm not saying that one should forsake materialism because of asinine markup habits, but I am saying to be reasonable about it. Because in the end of things the amount you "saved" might not really be an appreciable amount at all when you think about it.



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