By Bill Taylor
December 17, 2013
It seems to me that this time of year we are bombarded, inundated, swamped with all kinds of “specials” that offer discounts or giveaways as inducements to patronize one business establishment or another. It’s gotten to the place where a prospective customer is so confused that figuring out which “special” provides the best price for the commodity is almost impossible.
One popular gimmick is the BOGO (Buy One Get One). Fast food establishments use these offers to get the customer in the store - buy one (burger, fish sandwich, wrap, or whatever) and get a second free or at half price.
The gimmick is that the store management figures that the customer will also purchase something else such as fries or a drink to go with each of the burgers - and those have the biggest mark-up of anything else on the menu. We also see BOGO’s with the condition that the customer purchase a soft drink and fries to get the
BOGO - those high mark-up items help offset the “freebie.” One of the most intriguing is an offer of an order of free fries, no purchase required, — good only between the hours of midnight and 4 in the morning.
Some of the most puzzling BOGO offers come from a major men’s clothing company. Their ads sometimes state, “Buy one suit, get three free!” I kid you not — that’s what they advertise. We went to one of those stores several years ago and came home with a with a sports coat that was marked way down. It looked wrinkled on the hanger, but we figured pressing would remedy that. Wrong! No matter what we did or had done professionally, it still looked as if I had slept in it.
Anyway, today it hangs, unused, in my closet as a reminder of that old saying, “Buyer beware!” Live and learn, right?
Grocery stores also like to feature BOGO’s. I do most of our grocery shopping and am always looking for bargains such as true “loss leaders” which are items on sale at an unusually low price to get customers in the store. As a result I have a pretty good idea of grocery prices and find myself suspicious of many grocery store BOGO’s. When I see BOGO’s that claim a savings of almost $6 on the “free” jar of mayonnaise or about $4 on a “free” three pound bag of onions, I know the price has been jacked up just for the event. Okay, moving on.
We went Christmas shopping a few days ago and rapidly became bewildered with the markdown pricing and other discounts. Various stores had special discounts depending on the time of day (or night) in addition to the “regular” reductions. We found some sweaters we liked that were marked 70 percent off — and they were a well-known brand.
The gimmick, according to my resident expert on the quality and price of women’s clothing, was that the “original” price was ridiculously high so the markdown price was reasonable. The same thing was true for gloves we looked at. Their cost was fair after the big “reduction.”
So what do the people who examine pricing have to say on the matter? Well, according to Suzanne Kapner writing in the Wall Street Journal, “The common assumption is that retailers stock up on goods and then mark down what doesn’t sell taking a hit to their profits. But that isn’t typically how it plays out.
Instead the big retailers work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want.” Ms. Kapner cites as an example a sweater that a supplier sells to a retailer for about $15 may initially be listed for sale at around $50 - roughly a 70 percent mark up. After a few are sold at that price, the sweater is repeatedly marked down with most being sold at the final discount price of about $22, with an overall gross margin of about 45 percent.
So what about all these pricing gimmicks? Are they illegal, immoral or just standard business practices? Well, it all depends on your point of view. Retailers are in the business of making money so they offer customers a variety of goods at a wide range of prices. Careful shoppers who aren’t’t hypnotized by the dazzle of a BOGO or a huge discount may do quite well in finding bargains. On the other hand someone coming home clutching a product that was “such a bargain I just couldn’t resist” may be disappointed when reality sets in.
You know, in the long run, a good bargain is when both the seller and buyer part with smiles on their faces. At least that’s how it seems to me.
Bill Taylor, a Greene County Daily columnist and area resident, may be contacted at firstname.lastname@example.org.