I was listening to a story on the radio the other day about yet another large chain-store retail business that has succumbed to the “global economic crisis”. They’d put their various outlets on “liquidation sale” status and were advertising prices reduced up to %75 off. But when some customers were tearing off the price labels after bringing their purchases home, they discovered that the original price was not much different than the sale price and, in some cases, was even less. The journalist reminded us that “liquidation” does not mean “get rid of stuff at a loss”, it means “make as much money as you can in as short a time as you can”.
The whole story got me thinking about the retail magic of the word “Sale”. Everybody loves a sale, right? Why? – Because we think we are “getting a deal”. We think that we are paying less for something than we should be. But the reality is that we are often being suckered into parting with our money while at the same time being made to feel as though we came out ahead. As the above news story points out: 50% off an already over-inflated price is no bargain, and yet many people will snatch up an item that is 50% off, thinking they are getting good value for their money. In other words, the percent discount becomes such a central focus in the consumer’s mind that whether the actual price constitutes good value for the product is barely considered.
A hefty discount is also usually enough to convince a consumer to purchase something they don’t need, didn’t even know they wanted until they saw it, just because they think the price is so good. The thinking becomes focussed on how much was saved, as if buying it at the original price were a given. Which, of course, it usually wasn’t.
When it comes to sales, the consumer thought process goes like this: “This item is usually $100, if I get it for $50 then I’ve saved myself $50!”.
Why doesn’t it go like this: “That item costs $50, and if I buy it that is $50 less that I have to spend on necessities or put into my savings account”?
Getting a 50% discount is not saving money, it is spending money. We should always remember that.
I think that a good habit for consumers to develop is to decide beforehand what an item is worth to them, and how much of their budget they are willing to devote to the acquisition of that product. Then go find it. That may mean hitting Home Depot on the way back from grocery shopping, or it may mean scanning the weekly flyers for a sale that brings your price into range, or it may mean hunting through thrift stores and garage sales. But having decided ahead of time that 1) this is something you actually have a need (or a strong desire) for, and 2) how much value that item holds for you and your budget, I think that truly does shift the balance of power to you, the consumer.
With the holiday season approaching, a time when consumerism tends to run rampant, let’s all try to keep in mind the potential pitfalls of that four letter word.