X-mas sales. T’is the reason for the season to be merry……or so you think. It’s what the retailers want you to think. The truth is a little more scary and suggests that you should be wary of these so-called “holiday sales”. The Wall Street Journal recently published a mini-expose about X-mas sale pricing: according to this capitalist tool, the dirty secret is that sales items have inflated retail prices. OK, so we knew that already. The dirtier secret is that most of the discount is priced into the product, so retailers are making plenty of profit on these price-cut items.
The WSJ offers an example of this new pricing scheme using the example of 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.
A number of lawsuits have been filed against retailers like Penneys, Kohls and Jos. A Bank for inflated retail prices but those cases have not been resolved and, even if they are, it just means retailers will be more careful in the way they mark up retail prices.
Retailer marketing strategies have changed over the past decade. Retailers have learned about ‘segment analysis’ by which they are better able to target customers. Frequent purchasers or higher-income customers are courted and given better prices than other customers. Increasingly, whenever anything goes on sale, the better deals are gone because preferred customers are given first dibs. The bottom line: retailers’ new strategy is to reward loyalty.
So, as you head out to the stores or onto the Internet during the ensuing weeks, I urge you to place less import on the retail price tags on many of the items that you are considering. Use some of the comparison shopping tools that I’ve provided to you so that you can compare prices with other retailers. And you better be a good shopper, for goodness sakes, because otherwise Santa Claus will be taking you to the cleaners…….figuratively.