August 19, 2019

On Sales and Saving

In many parts of the world today, bartering for goods is a way of life – especially for produce.  Negotiating for a purchase price is probably the second most common form of buying and selling.  But I wonder what has happened today in the world of retail in the United States.  The real price of any good or service is clouded in secrecy and mystery.  Two of the most misused and confusing terms are words that glare out at us everyday – save and sale.  A friend of mine that worked in retail said at one time his store could not afford to sell an item priced at a dollar any lower than $0.43 cents.  That appears to me to be a very generous range of profit – $0.57 cents on a dollar?

Now, we know that “everything” today is “on sale.”  To do otherwise seems almost un-American.  I particularly like the words “regularly” and “originally.”  The ring, for example, was regularly $600.00 and the “sale” price is $199.00, but today, because the merchant has a special sale, it is $149.00.  So the ring sells for 25% of the “regular” price.   Now what really amazes me is the one day, one hour storewide sale.  Usually the store advertises 50% to 75% off all items marked for sale for their storewide bonanza.   They pay the sales tax; give seniors and those 55 and older an extra discount; give the first 100 customers that rush in the store at 4:00 AM a prize or an extra coupon or a flat screen TV.  The list goes on and on.  However, the buyer should also be aware of the great “interest and payment plan” that usually accompanies many purchases.

The good merchant offers no payments or interest to the consumer for an additional 3 to 5 years – wow!   Now I bought a TV a few years ago and tested the “no interest or payment” theory at a local store.  Oh yes, you can omit the payments and interest for the given period of time, but you had better have the full purchase amount ready when the final bill comes due.  Or, guess what, the full amount of your purchase is due along with all the accumulated interest for the last 3 to 5 years or whatever time period that you selected.  Now this can be very expensive if your purchase was substantial and the interest rate was anywhere between 18% and 30%.  A $3,000 furniture purchase could end up costing over $5,000.  Finance companies thrive on these “deals.”

What I find the most frustrating is the use of the word “save.”  I used to think of savings as putting money aside for a rainy day.  However, today we “save” all the time.  The word save really means that we spend less and has absolutely nothing to do with actual saving.  I purchase a refrigerator for $800 that was “regularly” $1100, and I have just “saved” $300.  If we like to use the Internet, our savings can be even greater.  I kind of like this savings as the merchant can market their goods on the Internet and avoid costly hardcopy advertising and, because it is so lucrative, offer free shipping as part of the bargain.

Now, one has to keep in mind that store charge accounts are probably one of the best things to avoid.  We not only save but we get to defer the payment on our favorite store charge account. Merchants love this as the interest rate is usually higher than either Visa or MasterCard and a 39% interest rate is not uncommon.  I had a charge the other day at one of the leading merchants in the amount of $86.12.  Making the minimum payment of $5.00 each month would take me over 2 years to pay the bill and I would have paid over $142.00 in total.

Merchants love odd numbers.  My thinking is that the pricing is more psychological than real.  I can now get a fast food burger for $0.99 cents versus the competitor’s burger at $1.00; the vacuum cleaner is $79.95 not $80.00; a sportcoat is $69.99 not $70.00; the list is endless.  Merchants also love catalogues and brochures.  The mail lady in my neighborhood gave me a less than kind look the other day as she stood at my front door.  “I cannot get all the mail in your box.  Have you ever thought of opening a postal box?”  She was right.  I had been selected as a “current resident” or “occupant” by all kinds of retail stores and merchants.  My recycling efforts have doubled as a result.

I will never understand the logic of the whole retail pricing system.  If the toaster is worth $25.00, why not advertise and sell it for $25.00 and avoid all the coupons, catalogues, brochures, special promotions, one day sales, one hour sales, Black Friday sales, Black Saturday sales, and the ridiculous hours associated with these “midnight” efforts?

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Written by
Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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Written by Donald Wittmer
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