When A Sale Isn’t A Sale
J.C. Penney is undergoing a price re-structuring. The days of coupons, clearance sales, and price reductions will soon be over come February 1st, according to Penney’s new CEO, Ron Johnson. Similar to Walmart, Penney’s will adopt an “everyday low price” strategy by permanently reducing its prices by 40%. The retailer will not eliminate sales all together, however. Plans are for “monthly value” discounts on select items and recurring “best price” sales twice a month.
Not all sales are sales
J.C. Penney’s change in pricing strategy makes the point that, often, sales aren’t sales at all. The fact that Penney’s can mark down prices 40% across the board reveals that many of their so-called sales were simply markdowns of over-priced merchandise designed to mislead customers into thinking they were getting a good deal.
Focus on the net price, not the percentage of discount
To avoid being deceived by sale advertising, coupons, etc., understand that discounts are relative, which makes them virtually meaningless. Merchants can set their prices at whatever level they desire. One retailer can mark up his merchandise by 50% over his competitor’s list prices and then advertise deep discounts of 50%, which takes his prices back down to the level of his competitor’s list prices. Both merchants sell their products at the exactly the same price, but the one can claim a 50% discount, because his list prices are that much higher than his competitor. Within the discounter’s store, the 50% discount has meaning relative to his list prices, but in the marketplace as a whole, the 50% discount has no real meaning.
Therefore, the key to understanding when a sale is not a sale, is to focus on the net unit price after discount, not the percentage of discount or any other terms of sale such as buy-one-get-one-free, buy-two-get-one-free, buy-one-get-one-at-half-price and so forth. The net unit price tells the whole story. How does that net unit price compare to competitors’ unit prices? Answer that question and you will know if the sale is a sale.
Be an informed consumer: Comparison shop
Comparison shopping is the best way to discover the true price of an item in the marketplace and to know if you are getting the best value for your money. The problem is, items aren’t always packaged exactly the same. For comparison shopping to be accurate, you need to compare apples to apples. One way to accomplished this is by doing unit cost comparison. To compare prices of items that are packaged differently, identify the unit of measure (pounds, ounces, each, etc.) that the two items have in common, then calculate the unit price for each item by dividing the total price by the number of units (total price ÷ number of units). Then compare those unit prices to see which is lower.
Of course, if you are purchasing items such as jewelry, apparel, electronics, and such, it may not be possible to use unit cost comparison. Substitute comparison by brand name or specification, instead. Just make sure you are comparing like items so you can get a sense of the going price for that item in the marketplace.
An informed consumer knows when a sale is a sale and when it is not. Take the time to be an informed consumer. Know the marketplace and focus on the net unit price of the item you wish to purchase. It’s worth the time to make sure you get the best value for the money you spend.
K.C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages
