Sep 4, 2012
The End of the Sale
Why there may be a lot less of them in the near future
Like sales? Of course you do. Everyone likes to save a little money. But you may be seeing a lot less of them in the near future.
The idea behind a sale is that customers are attracted to stores by the lower sale prices, but stay inside and buy other things for regular price. That allows a store to remain profitable while reducing pricing on certain items.
Unfortunately for retailers, most of us have gotten so hooked on savings that we won’t even consider buying anything unless it’s on sale.
In fact, earlier this year, almost 75 percent of 1,000 shoppers surveyed by America's Research Group said it would take discounts of at least 50 percent to get them to buy a given item. That's up from 52 percent in 2005.
Those of us hooked on sale prices are apparently going to need a new outlet, because retailers have recently soured to the idea.
New research shows that the big sales—60, 70 or even 80 percent off—have cost companies big bucks over the past few years. According to a survey of 122 merchants by research firm Retail Metrics, annual profit growth was cut in half between 2006 and last year.
Losing half of your money in five years will make just about anyone reconsider their business model and the retail giants in the US are no exception. Companies like JC Penney and Lowe’s have cut back on sales and are instead opting to court consumers with so-called “everyday low prices.” On average, the “everyday low prices” are generally reduced by about 40 percent from a store’s normal pricing.
This means two things. First, customers can expect to see far fewer sales and coupons. Folks who are hooked on “blowout savings” are going to find themselves with far fewer savings extravaganzas to attend.
Second, customers can expect lower prices at most stores because retailers are looking to employ the Wal-Mart strategy of creating an association and expectation of low prices.
That could be good or bad news, depending on how you look at it.