I have, in my car, a 4″ high pile of coupons to Bed Bath & Beyond. I’m guessing you do too.
After all, they’re everywhere. Direct mail, magazines, my email in-box. And the rules are 20% off one item but the reality? You can use as many coupons as you have chosen to buy items. The coupons never expire.
So, to my little simplistic brain, what does that tell me?
Everything has been priced 20% higher than it “needs” to be, so the company remains profitable even while redeeming those ubiquitous coupons.
Which means that well-dressed gentleman behind me in line buying a $200 vacuum, was about to pay $40 more than he “needed” to until I gave him a coupon from my stack.
And that’s retail’s dirty little secret. Mark up to mark down.
Marking it down or giving her a coupon makes the consumer feel smart. Like she’s put something over on the shopkeeper. People like to feel smart when they exchange their hard-earned dollars for goods.
How many consignment, resale, and thrift shopkeepers “mark up to mark down”? Probably you, probably me, probably any shopkeeper who is attuned to the psychology of today’s shopper. If it’s worth, in your estimation, $50, do you price it at $60 so you can “magnanimously” offer that browser 10% off?
You better.
It’s a minor detail that you’re now collecting $54 for something you in your heart of hearts feel should be priced at $50. That’s what, 8% more than you gut-feel it “should” be worth, and you’ve allowed a a customer to think she’s clever? Sounds like a win-win to me.
Do you?
Tell us your thoughts. Is this a valid way to do business, given today’s consumer mentality? Do you refuse to participate in these mark-up-to-mark-down games, and if so, how are your shoppers taking it? Do you feel it’s fundamentally unfair, even crooked, to raise prices so you can lower them? Or are you simply adjusting to the current thinking by customers?
Auntie Kate The Resale Expert 
We have never marked up and never will. Don’t forget that you “never get a second chance at first impressions”! If you routinely mark up the consumer is likely to get the impression that your prices seem a little high, especially when compared to the shop down the street that doesn’t mark up! They’ll never know that you’re willing to haggle or offer another form of discount if they don’t ask! How many prospects have walked out your door with never buying anything because they thought your prices were too high? Our coupon program, sales and savvy shopper cards have been a big success without having to mark-up!
I think yes. I price higher so that I have room to mark down. I mark down systematically by 25% after day 30 (as per the TGBT method). That way when something is pricey (e.g. a luxury label) I can say, “Well, if it is still here after 30 days it will be marked down by 25%….” In other words, “Take yer chances…” I suppose I should try harder to sell them on `BUT don`t forget, here now, gone tomorrow…` I like to think it`s understood.
Thanks, Stephanie, I too like to use the “well if it’s still here after…” phrase, but I say “well, if someone else doesn’t grab this up before…”
That way, the ” Buy It Now/ It Won’t Be Here Tomorrow” is reinforced and the customer is reminded that yes indeed, it’s one of a kind. I aim to allow her to decide that making a trip back to save a few bucks… IF it’s still around… probably isn’t worth it.
We put a 10 cushion in the price because everyone wants a “Deal” and when we did the real price they wanted to barter…so now we barter down to the price we need and they are lapping it up. It is the mentality of our local market. We are now selling more. Go figure and getting the price we need in order to stay profitable. The other trend I’ve noticed is our local market will bulk at prices for similar items in our shop but will go 90 miles south and pay more for the same or similar item in shops down there. Customer psychology…go figure.
I like this method, too, though. Hmmmm!
Exactly !!!!
Penny’s tried the “real pricing” and it got them nowhere. Customers wanted their coupons, even though the new pricing was close to what they spent before with all the coupons. Customers have to “feel” like they are getting a deal no matter how good the price may be to start with. What is so funny is that when a customer finds out how stores mark up to mark down, they are appalled!
So true, Kathy. For a deeper look into what the JC Penney’s debacle could teach us, there are 3 blog posts covering its recent history. See them at https://auntiekate.wordpress.com/?s=penney
I just opened a childrens consignment store about a month ago and it’s true I have learned in such a short period of time that consumers love a deal no matter how minimal. I’ve had 10% off sales where the consumer didn’t see the sign and know that item was 10% off and when realized it chose another item to get the deal. It’s amazing. Sidewalk sales, maybe pushing a rack outside for the day is great for business and also gets them in the store. It’s made a world of difference in my shop that had a slow start.
Yes! Another thing I learned is that every retail outlet has it’s cycle. High/mid/clearance. So a top that was originally $150 at Nordstrom (clearanced at $80) mightstill start at $90 at Maxx and if you happen to get it at your shop with it’s red tag still on it, you might cut off the $25 red tag and start it at $45. There is always that shopper who didn’t shop. Maxx or Norstrom clearance and will think it a bargain at $45. You can always drop the price later in your own cycle. Just because it was low some where else doesn’t mean YOUR shopper needs it that low. Then again, if it is a weird color in an off size it may very well be only worth $25.
This is the topic that I’ve been discussing with my staff and family for a while now… We call it the Kohl’s game, since they routinely offer 15-30% off coupons in the mail and to the credit card holders. Lots of stores in our area do this in one form or another.
Correct me if I’m wrong but I remember from years past, your advised stores Not to “train” your shoppers to expect a coupon or discount. Would you sat that is changing now, that they are so fully trained by all the other big stores doing this coupon and discount game?
Yes, Jenni, you are right… training people to expect discounts, coupons and the like is a sure way to either cut profits to the bone (making one’s business, perhaps, untenable in the long run)… but the public perception of shopping has definitely undergone major changes in the near past. We must play the hand given, yes?
Now YOU and I know that in order to have 15-20-30% discounts all over the place, the stuff has to be marked up to allow a decent profit when sold at that percentage off “original” price. But the consumer doesn’t get this, doesn’t think about it, and simply wants to “outsmart” the stores. Heck, even you and I, seasoned retailers, get excited when a price tag says “Originally $12,000, now $3897” (if it hadn’t been so hideous I would have jumped at the chance to “save” over $8000! 🙂
I don’t own a store (yet… I will!), but my gut really doesn’t want to do this marking up to mark down thing. I want to fight against it with everything inside of me. I want to be the store that never has sales because everything is marked as low as possible anyway — like the dollar store. No loyalty cards, nothing like that. Alas, I have a feeling that it just won’t work. Customers want loyalty cards and sales. It’s just the way of doing business.
WS, you are wise to understand it’s not what YOU want to sell, or how you want to sell it, or when or where… it’s what your target market wants! After all, if I had my druthers, I’d sell seashells by the seashore, ya know?
I`m now 19 months — still new at this but starting to feel kind of seasoned. One of the keys to success is to constantly be flexible in your approach and to be constantly tinkering. I started off with rock-bottom prices just to build my clientele. As I have built clientele, my prices have gone up, oh heck yes.