Mark it up, price it down

Sale standeeMark it up and price it down.

That retail practice is alive and well. Thriving actually, according to an article in today’s Wall Street Journal (The Dirty Secret of Black Friday ‘Discounts’) that’s a great read for anyone planning to do some shopping Thanksgiving weekend.

It’s an interesting article about common retail pricing strategies, including how most deals are actually “a carefully engineered illusion.”

It also goes a long way in explaining why the Banana Republic near my house has a “Save 30%” or “Save 40% today!” standee by the front door seemingly every weekend.

This data really jumped out at me:

“The number of deals offered by 31 major department store and apparel retailers increased 63% between 2009 to 2012, and the average discount jumped to 36% from 25%, according to Savings.com, a website that tracks online coupons.

Over the same period, the gross margins of the same retailers—the difference between what they paid for goods and the price at which they sold them—were flat at 27.9%, according to FactSet. The holidays barely made a dent, with margins dipping to 27.8% in the fourth quarter of 2012 from 28% in the third quarter of that year.”

Not to take all the fun out of holiday shopping, but the article highlights the relevance of trying to determine true bargains (e.g., loss leader discounts) from illusory deals.

Shoppers are already wary of paying full retail prices. After reading this article, you may find yourself even more so.

Speaking of retail practices and holiday shopping, I’d like to share a book recommendation: Paco Underhill’s Why We Buy: The Science of Shopping.  It’s one of my favorites. If you or someone on your gift list enjoys marketing and/or business books, it’s a well-written and interesting look at shopping that’s based on his research as a retail consultant.

Do you have any favorite marketing books to recommend? It’d be great to hear. Please share in the comments or via the contact form. (Or just send it to me as a holiday gift. Haha, just kidding).

4 thoughts on “Mark it up, price it down

  1. I knew it – smoke and mirrors. From now on I’m only shopping at JC Pennys.

    Enjoyed your blog as always – glad to see you’re able to keep up with it as busy as you are.

    I know less about marketing than I know about most things, but came across this by accident and the idea of it intrigued me – sure there is some technical term for this, but I just enjoyed the sneakiness of it (something for free that is not): http://theselfemployed.com/marketing/the-5-guys-fries-trick-that-will-blow-your-mind-and-sales/

    Enjoy your double holiday – see you again in another 78,000 years.

    We’re having a few people over for turkey and going camping in your namesake state park Friday.

    – yoder

  2. Thanks for the book recommendation. I’ll add Why We Buy to my (lengthy) wish list.

    As for books I like, I’ll go with The Power of Habit by Charles Duhigg and How We Decide by Jonah Lehrer. If you check them out, please let me know what you think.

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