When a special really isn’t that special

26 Jan

0
0
0
0
0
0
0
0
0
or copy the link

When next you reach for a ‘bargain’ or a ‘special’ keep in mind that there is far more to these words and the way they’re presented to you than first meets the eye. Saving may be the last thing you’re doing when you pop into your basket a product that is ‘on special’. You might be the unwitting participant in what is being referred to as ‘retail theatre’. So, here’s the low-down on ‘discounted’ products.

Getting you through the door

The typical purpose of so-called discounts is to get customers into shops in order to sell as much product to them as you possibly can. But retail-industry veterans acknowledge that, in many cases, these bargains will be a carefully engineered illusion.

If you’re like most people, you probably think that retailers buy up stock and eventually mark down those items that have not sold; their profits taking a hit in order to make room for new stock. But you would be mistaken. That ‘discount’ that seems so impressive to you – that real bargain – has been planned for all along. This is so that no amount of discounting of goods will hurt a company’s profit margins. In other words, that pair of boots marked down by a whopping 50% was never meant to sell at its full retail price.

Cash loans for ‘bargain’ shopping

Now that you know that specials aren’t always that special, would you give up on ever buying another discounted product again – just because it was such a terrific special? Trends around the world suggest not. The manufactured ‘high’ of shopping for, and discovering 50% off on a particular item, seems to be too deeply entrenched in consumers’ psyche to put off bargain buyers, even once they know the truth about so-called specials. But the next time you’re waiting for those store doors to open and the stampede to begin, ask yourself this question: How do retailers manage to sell so much of their product at bargain, special and sales prices and still make such healthy profits? The answer: because that bargain special you’re headed for is, in truth, the intended full retail price.

Industry experts predict that bargain shopping is set to keep increasing as consumers attempt to cut back on non-essential buying. Despite discounts being priced into product anyway, retailers have cause for concern – increasing competition between brands and stores, could begin to hurt profit margins. Especially if they’re left with stock that doesn’t sell and are forced to resort to bigger, unplanned-for discounts.Cash loaners like Wonga that operate exclusively online are seeing more people using their service to grab a “discount” before pay day, so this trend shows no sign of slowing down.

New ways to set prices

Several retailers have, over the years, made less than successful attempts to move away from discounts and offer lower prices year-round. But narrowing profit margins has forced them to again offer these ‘deals’ in order to compete with other retailers. This has resulted in retailers marking up their goods in order to protect their profit margins when the discount or sale price is applied. For the consumer, this means that list prices are set well above where goods are actually expected to sell.

This is how it works: A supplier or manufacturer sells a shirt to a retailer for 14.50. The suggested retail price is 50.00 which gives the retailer a 70% mark-up. A handful of shirts sell at that price, but more sell at the first markdown of 44.99, and the bulk sell at the final discount price of 21.99. That average unit price is therefore 28.00 – a 45% gross margin on the product.

This sort of ‘retail illusion’ is a relatively modern concept. Pre-1970s, most items were sold at full price, with a limited number of sales to clear unsold inventory, but in the 1970s and 1980s, as retail business boomed and more and more brands and stores hit the high street, retailers were forced to look for new ways to stand out from the competition and continue to turn the profits.

Silly season

Ironically, it was the result of increased competition, that has seen bargains, specials, sales and discounts become part of a shopper’s everyday life. And you don’t need a financial expert to tell you that we as consumers are paying far more for products than we were in the past when sales and specials were a rare occurrence because the initial prices of products has increased.

The way to a good deal

The best way to avoid spending money on a discount that just isn’t a good deal is to carefully note down what you ‘need’ versus items that you ‘want’. Never buy something that isn’t on your ‘need’ list just because you believe you’re getting a good deal. Plan your spending where you can, a strategy that should see you relying less often in an emergency on a cash loan providers like wonga.

No comments yet

Leave a Reply