I'll give some examples of products/retailers; up&go, Lenovo, Grain Waves, Fratelli Fresh, eBay (more recently), Priceline, any work shirt, anything Xiaomi.
I know it's marketing and will attract new customers, but when they occur so often you can't bring yourself to pay full price so stop buying them altogether as the lower price is the price you 'expect' to pay.
Agree? Can you think of any other examples of stores/products?
Pride before patience…not the OzB way!
So when you have a headache now and want a Panadol you wait till it's on sale? Not everything has to be the best price.
I'll email scotty with a new slogan proposal;
"OzBargain - Not everything has to be the best price"
Probably the biggest one for me is all these gearbest type sales with limited nos that sell out in 20 mins. It's affected my decisions in much the same was as the constant ebay discounts and now I tend to wait, forever if necessary.
Now can someone hurry up and post a decent deal on a quality 3D printer. I'll probably end up buying a Prusa MK3 simply because I can't save $100 on a Crealty 10s, where's the logic in that?
Yes or the websites that knock off a big discount and their website can't handle the few hundred extra people that browse them. Don't they plan for these things?!
Of course. Each $ of price reduction hits the bottom line directly.
Businesses need to survive in the short run and the long run. Unfortunately they don't operate in isolation - they face competition; they'll only drop their prices if they are forced to by competitors (e.g. customers going to buy shirts at the competition because they have a 40% sale on, or customers going to Aldi to buy their home brand products manufactured by the competition).
Note that not all of the price reduction is a loss to the business. The cost of goods sold has dropped significantly with the increase in global trade (see Adam Smith) and so the businesses can pass on these savings to the consumer.
Sounds like you know more than I would, I'm just a stubborn consumer though. These savings you talk of are reflected in most retail shops, some discounts these days are crazy. Even Wollies a years back wouldbseldom offer reductions more than 20% off.
They also wouldn't have jacked up the prices by hundreds of percent either but greedy executive's rule these days.
I don’t think discounting is a disservice. There are a number of measures that are important to a business. Net Sales ( revenue), profit $, and margin %.
A business needs to see at least two of these improving. However investors will be expecting all 3 to constantly be improving.
Price/ discount Is just one of the levers
When I see places offering a product for 50% off, and bearing in mind they will still be making a profit, it just demonstrates how much they are ripping you off at the "normal" price.
Reminds me of David Jones when they were an Aussie company and published their store sales data and margins. Even allowing for all of the price reductions through sales campaigns their average gross margin on sales was around 46%
David Jones will price match for other stores as well. Bought the Phillips pasta maker that they had for $279 for $120 because they price matched HN. You wonder what idiot would've paid the $279 price without doing any sort of Google search to check prices.
A lot of idiots.. like all the people who lined up for the Dyson vacuum at Aldi's a few weeks ago
Some Aldi buyers are like cult followers. You only have to see the list of recalls on their no brand products to be a tad wary.
@sqeeksqeek: More like the equipment that breaks down and has to be recalled, but good try for baiting someone with an irrelevancy/
Very deceptive though, gross margin is a result of using simple metrics like Sales revenue less cost of goods sold. It does not cover overheads like general salary, rent, cost of customer acquisition (marketing), warehousing, electricity etc etc
46% may sound lucrative but clearly not enough since DJ/Myer have been posting dire news recently.
Honestly I don't think much of getting 'bargain' prices, but I think culture like OzBargain has infiltrated so much into the general population unlike the old days where it was a hobby for the few, it's starting to affect retail stores.
Not really deceptive at all as the proper definition of "Gross Margin" is exactly as you stated.
i think there's a basic conceit here
if you make things the public wants, then you dont need to reduce prices
apple products? ms surface? samsung galaxys? numerous luxury cars?
if you're fighting a consumer space that isnt all that receptive to your products then you have to cut to get that wallet slice
put it like this, you mention many products that people just dont want like Grain Waves
another way, why does Coke sell particularly well? How come not Pepsi?
Dell XPS laptops are quite expensive. How come that Dell 11 Inspiron 3000 is only selling at 20% off at $300?
Since Xiaomi is a popular topic… this company sells to a billion chinese
does it matter what their 'strategy' is for 25 mil. of us?
Further outside of ozbb in the wider aus. public they would have no name recognition.
In fact I believe Xiaomi isnt all that concerned about Western markets. You only need to look at what their 2nd most important market is… its India.
Australia tends to overstate its importance in the global sphere.
Generally yes.
If something is always on sale, people will not buy at full price.
That's my exact point. For example, up&go have been on and off half price for years, but hasn't been half price now for a few months and I've got none left. I refuse to buy at half price as I'm so used to paying half that amount. I'll sit tight and wait.
What's the definition of full price?
What's the definition of 10% off (10% off what?)
My local Coles regularly increases the regular price of an item and immediately offers it a discount so that it is back to the old regular price.
Anaconda and BCF seem to be in permanent 'don't miss this sale' mode. The 'don't miss this sale' might end on Sunday, but you know that on Monday it will be followed by another 'don't miss this sale'.
I guess the RRP. Not that we as a group ever pay that! Yes that's very shady practice andbshouldnt be allowed.
I remember during my studies looking at loads of this stuff. One line of thought was that if you were selling premium products that retaining high prices you kept that perception of a premium product. there was a whole line of research into what consumers wanted, almost a 'Maslow's Hierarchy of Needs' for consumerism, ie as people became more wealthy what they sought out in a product. I wont bore you all with it but for some premium products the presige or exclusivity of a product is a large part of the attraction. in some cases having a Lamborghini might not be enough you would want the 1 of a kind custom paintjob version with hand stitched seats made from extinct cows sewn together by italian virgins under a fullmoon in the cusp of aquarius!!
This is why brands like Rolex etc dont discount, they literally pay somebody to destroy unsold watches rather than sell them at a discount. End result is that they can sell a watch that probably costs a couple of hundred to make for many thousands of dollars.
It is probably a tricky business to work out. If you start discounting it might be hard to stop. Similarly if you cant sell your watches for $15K but you could sell them for $5K and your business is failing it would be tough for management to resist discounting to get some cashflow. I deal with this type of dilemma daily, i sell consultants into a very niche industry. I regularly talk on the phone to independent engineers etc that tell me what their demand/price is, I tell them the client wont pay that and they need to sharpen their pencil. Sometimes i get somebody that politely tells me thanks but its not worth my time and walks away and in all honesty, good luck to them, they know what they are worth and are probably getting it already elsewhere. i also talk to a lot of people that have read the theory of devaluing their brand that try to hold to their price because that's what they were taught in their MBA. When the client doesnt fold and agree to pay more they get very irritated and desperate. If the client moves onto another candidate that will meet their budget it can get quite messy. i have spent hours on the phone to engineers that want to tell me how great they are and why a client should pay a premium for them. When i tell them the client wont budge they often struggle with the dilemma of going without or discounting.
Supply and demand, the great leveller!
Sometimes you need something immediately and don't have time to wait for a sale. In those cases, you'd have to pay full price and swallow your pride. Sometimes you have a lot of money and don't care if you squander some of it. No point in listing more stores or examples.