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Friday, October 16, 2009

Truth in Retail Sales

I don't mind sharing my email addy to get something for free on the internet. In fact, I have 3 email addies:
  1. One that is so loaded with SPAM that I don't even bother to check it,
  2. my "real" email address,
  3. and the one I use for offers that I know could lead to SPAM.
But email addresses are cheap. Free, in fact. My phone number is another story. What is it with retailers requiring you to "sign up" in order to get their sale prices? I'm thinking of grocery stores. This whole "loyalty" card thing is new to me. You see, when we lived in rural Missouri, we had exactly 2 choices for groceries: Walmart or the regional grocery store (Hy-vee). Sales were, well, sales. Anyone got the sale price just by giving a store your business.

Now that we are living in Maryland, it seems it's not enough for me to patronize a store and spend my (husband's) hard-earned money in there...I have to sign up for that store's loyalty card and give them (one of) my email address(es), my mailing address, even my phone number. After being deluged with telemarketers for the past 2-1/2 weeks from having our mail forwarded to our new address (I suppose I should be thankful that the postal service apparently has a steady source of income---I just wish it didn't take 30 days to be added to the national "do not call" list), I am naturally hesitant about giving retailers a legitimate reason for calling me and the opportunity to sell my information to someone else. And wondering about the ethics behind requiring customers to give you their private information in order for the privilege of spending (a little less) money in your store.

Let's look at an example of a recent advertisement in our area (I've withheld names for obvious reasons):
A local chain has their store brand (store brand!) boneless, skinless frozen 2.5lb bag of chicken breasts on sale for "buy one, get one free." With the loyalty card. Without the loyalty card? 12.99 each. 12.99 each! Let's give our "loyal"customers an ok deal (2.59/lb is not bad, but not great either) and totally rip-off our "non-loyal" (how dare they give us their money but not their phone numbers!) customers (5.20/lb for chicken?).

My point is that these sale prices are no great shakes. They are reasonable prices for food, perhaps, but not some super great deal that everyone should run out and stock up on. They are similar to prices I can get at Walmart any day of the week.

Now, there are a lot of people who won't shop at Walmart. I don't begrudge anybody the right to shop at any store they like or not shop at any store they don't like. (And I do prefer to buy locally, if what you mean is buying from actual locally owned businees, but let's be honest here, most grocers nowadays are no more local than Walmart and they ship their produce in from South America, too. If you want local, buy direct from the grower/producer.) If you want to blame someone for local stores struggling and going out of business, it's not as simple as the new Walmart "running" them out. It's a complex mix of various factors, not the least of them being that retail stores tend to play games with us regarding how much we need to pay. Walmart does not, and I think many people appreciate that.

I worked in retail (in another life) for 10 years. It's a retail store's goal to get as many people as possible to pay the highest price point possible on each product. Let's say a new pair of jeans is available for $75. A certain (small) percentage of people will buy them at that price. The people who can afford it and don't have time to shop for bargains. After awhile, the jeans will go on sale for 10% off. A new group of people are now willing to buy. Then they are 20% off and so on. Finally, they go on clearance for 75% off or more, and a group buys up the dregs of the lot. (Next season, they are on someone's yardsale table for $2. I might buy them then.) So the retailer is doing a little "dollar cost averaging," trying to sell the jeans for the highest average cost possible in order to make their overhead and maybe even turn a profit. It's a rough way to try to make money (I have a lot of respect for retailers, it's very hard to run a retail business without going broke).

It's the same with food. I've no doubt that there are some people out there who can afford to pay $5.20/lb for chicken and don't have time to waste filling out the 1 minute form to get the loyalty card. So the store actually sells some at that price. But most people will either skip it and buy something else, or hunker down and give out their private (valuable) information to get a more affordable price. (They'll also buy a bunch of stuff that's not on sale at all, but it's on the grocery list.) And some of the food will get marked down or thrown away because it reaches its expiration date. Remember, that's "dollar cost averaging."

Here is where the big lie comes in: I'm supposed to believe that the store is "giving" me $12.99 worth of food free just for being a "loyal" customer (notice how the checkers are trained to tell you how much you saved). Or that I'm only paying $18.75 for this pair jeans, but they are really worth $75. What is the true "value" of a pair of jeans (or a pound of chicken)? Exactly what I am willing to pay. That price might be different for every customer in the store. We all prioritize things in our lives including what we buy.

So, here's an idea: how about if retailers cut to the chase and instead offer products at a reasonable (yeah, I know, that's highly subjective) price from the beginning. Then reduce the price towards the end of the season (for clothing) or continue to offer periodic "loss leaders" to compete (for grocery). Of course, you would still have "luxury" items (for those who can afford them), but at least you wouldn't be paying luxury prices for everything. I'd be willing to bet the bottom-line would be about the same, but there'd be more truth in advertising, less time wasted by consumers every week on not getting ripped off, less time spent by retailers setting sales and the public might have a more realistic understanding of how much things really cost. Let's fix our consumer market first...then maybe we can tackle the healthcare system.

2 comments:

  1. Thanks for an inspiring reflection.
    Three points re: your proposal--
    1. If your plan is a good one, I am surprised no one has exploited it yet, given the cutthroat nature of retail. We are just talking theory, but they have skin in the game, so to speak.
    2. If some nontrivial minority of purchasers is willing to pay $75 for jeans, then it seems to me $75 IS the reasonable price for the seller to set, since he can always decrease it after hooking those buyers.
    3. Later purchasers also receive the intangible benefit of getting "$75 jeans" for $30, or $10. All this disappears if the price is moderate to begin with.

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  2. Point 1: Walmart HAS thought of it. They've found their niche:-)
    Point 2: There will always be designer clothes, just as there will always be gourmet food available for those with big enough pocket books and I don't begrudge them that.
    Point 3: The intangible benefit of not being suckered into paying the $75?
    Seriously, though, the jeans were probably a bad example as what really got me started on this was the cost of food.

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