I love my wife. She has made my life far better in too many ways to count. She is my partner, my counselor, my confidant, my friend and most assuredly my better half. She is smart, strong, funny and most importantly, of course, beautiful. But there is one thing about her that makes me a little crazy. She loves shopping when things are “on sale.”
A few years ago, one of my favorite aunts was able to convince her to do a bit of “sale shopping” by telling her that I wouldn’t mind because she was actually “SAVING” me money. Did you catch that? She was saving me money by going shopping during a sale! So I shouldn’t think, “Oh No! You just spent $100!” No, I should consider how much cheaper the products were, and think of it like that. So my wife didn’t spend 100 bucks — oh no, she bought at half off and saved me $50.
I will admit that this new tactic had me flustered.
But not anymore. Now I know the truth. Now I have the proof with which to combat this argument.
A new report from the Wall Street Journal shows that instead of actually saving the shoppers any money, sale prices are planned by the companies all along.
The common assumption is that retailers stock up on goods and then mark down the ones that don’t sell, taking a hit to their profits. But that isn’t typically how it plays out. Instead, big retailers work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want.
The red cardigan sweater with the ruffled neck on sale for more than 40% off at $39.99 was never meant to sell at its $68 starting price. It was designed with the discount built in.
Buyers don’t seem to mind. What they are after, especially in such a lackluster economy, is the feeling they got a deal.
Here’s how it works, according to one industry consultant describing an actual sweater sold at a major retailer. A supplier sells the sweater to a retailer for roughly $14.50. The suggested retail price is $50, which gives the retailer a roughly 70% markup. A few sweaters 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 produces an average unit retail price of $28 and gives the store about a 45% gross margin on the product.
So, dear readers (and dear wife), when the local department store advertisers a big markdown or sale… don’t buy it! (Literally.) Their Big Sale ( like Black Friday ) is just them getting rid of the product at the price they always hoped to get anyway. You aren’t getting a good deal, you’re just getting duped.