Seeking Alpha

Retailers build discounts into initial prices

  • Consumers who think they'll be getting huge discounts on Black Friday might want to think again. In the words of the WSJ's Suzanne Kapner, "those bargains will be a carefully engineered illusion."
  • Retailers and suppliers first work out the lowest price they can sell a product at and still make the profit they want, and then they jack up the "suggested retail price" so that the retailer can later offer a big discount.
  • Another tactic is for stores to raise selling prices just before the holiday season discount period kicks in.
  • Retailers: WMT, JCP, M, SHLD, JOSB, MW, KSS, BBY, TGT, HD
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Comments (10)
  • june1234
    , contributor
    Comments (3255) | Send Message
    marketing an American tradition. Fiat has always been an entry level car in Europe, stateside its presented as an "italian automobile".
    26 Nov 2013, 05:04 AM Reply Like
    , contributor
    Comments (4714) | Send Message
    Fiat is an Italian made car.
    26 Nov 2013, 07:36 AM Reply Like
  • fuzzymc
    , contributor
    Comments (176) | Send Message
    The average consumer is not smart enough to calculate sale prices , they are attracted to signs and numbers like 9's, they think if it is on sale it must be cheap! Wrong!!
    26 Nov 2013, 06:31 AM Reply Like
  • Qniform
    , contributor
    Comments (3387) | Send Message
    The same approach to stocks can be seen at SA.
    27 Nov 2013, 10:57 PM Reply Like
    , contributor
    Comments (4714) | Send Message
    This is old news, this strategy has always been in play.
    26 Nov 2013, 07:33 AM Reply Like
    , contributor
    Comments (22) | Send Message
    Not a "discovery" article. The alternative would be back to Ron Johnson strategy. That would be real news if all the mentioned companies used his pricing idea of lower prices day-in day out with rare sales.
    26 Nov 2013, 08:20 AM Reply Like
  • bakmanone
    , contributor
    Comments (39) | Send Message
    Is this a surprise to anyone? The prices on Memorial Day and Labor Day are just as good usually. The retailers have turned Black Friday into a joke or can you say scam. Wake up shoppers and smell the sale prices.
    26 Nov 2013, 08:28 AM Reply Like
    , contributor
    Comments (98) | Send Message
    The first time I noticed this phenomenon was about 40 years ago when my wife was all fired up about Pennsylvania House furniture
    being on "sale, at least 50% off", (and still way too expensive- but
    what do I know). So, I finally convinced her that they just "mark-em
    up so they can mark-em down". Most autos are sold the same way.
    I see that GM is ALREADY offering HUGE discounts on their just-
    released 2014 pickups!
    26 Nov 2013, 09:46 AM Reply Like
  • samsptl
    , contributor
    Comments (31) | Send Message
    This is marketing 101. How is it some kind of "revelation"?
    Figure what is the sell price that gives the retailer the margin they need, then sell at the highest price above it that the market will bear. Retailers are simply giving consumers what they demand - some sort of hyper sales event. Just ask Ron Johnson... Consumer's proved they wanted special sales events not true everyday low prices. And if you won't give the consumer what they want they will shop elsewhere.
    26 Nov 2013, 01:48 PM Reply Like
    , contributor
    Comments (98) | Send Message
    By the way, how did FIAT become involved in this story? Are they now
    giving them away as stocking stuffers?
    27 Nov 2013, 12:59 PM Reply Like
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