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August 2018

Did I get a good deal?

It’s beautiful! But, did I get a good deal?

A customer recently took a cruise and bought a piece of jewelry. She came in to have the ring cleaned. Everything looked fine. She then proceeds to tell me about her trip and how she kept going back to the shop and the price kept getting lower. She was able to buy the ring for about 60% off the original ticket price. She asked if she got a good deal. As it turned out, she paid about what she should have for the ring. Then, she asked if the stones were real.

Deal, or not a deal?

Cruises and tourist spots a notorious for beginning with a high price, only to drop the price to make the sale. In many countries, haggling is normal. Both parties know the ticket price isn’t real and work to come to a mutually agreeable price.

Here in the US, some stores have conditioned customers to expect a discount with those phony sales of, “up to 70% off!” Penney’s several years ago experienced tremendous push-back when they went to an “Everyday Low Price” policy. I overheard people saying they would stop shopping at Penney’s because they wanted the discounts and coupons. After what seemed forever, Penney’s fired the president and went back to the old pricing policy. A local tv consumer advocate purchased a new shirt at Penney’s. The ticket shows $30 for the shirt. The sale gave him 40% off. He paid $16 for the shirt, a price he thought was good. Unfortunately, Penney’s had placed a label on the ticket showing the new price. The reporter removed the sticker and found the ticket had a printed price of $10. So, the “sale” cost him $6 more.

You should understand that every store has a target profit they need to stay in business. One large jewelry chain has to achieve a 60% gross profit as required by their bank. No matter how much they take off the ticket price, the profit has to be 60%. So, they could have a ticket price of $500 and take 60% off, making the sale price to be $200. If their cost was $90, then their target was achieved. Another store may offer the same piece at $200 realizing the same profit, but would the public buy it? In fact, the other store could probably charge less because their overall expenses will be less than the big box/ mall store, saving you even more. The pricing game benefits the stores, not the unknowing consumer.

So, next time you’re shopping and getting a sale price, ask yourself if you would buy the piece without a “sale.” If you wouldn’t, then the original ticket price is just a come-on and you’re really not saving money.

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