Final Markdowns: Why That Bargain Price is Not Such a Bargain

In the midst of this recession, more consumers have become price-sensitive as they’re faced with job losses, pay cuts and higher prices for the goods and services they’re used to buying. In response, retailers have tinkered with their strategies to get us to spend more than we intended.

Moneyland reports that stores are barraging us with misleading prices and signage claiming certain products are a screaming deal, when really they’re just offered at the same old prices. While the article focuses primarily on the grocery industry, this trend is evident in almost all sectors.

Department stores immediately come to mind. Next time you’re inside one, take a look at several different price tags. You’ll notice a grossly inflated original price and a sign on the rack above — 60% off. Often, you’ll get an extra 15% off an item when using a store credit card. Retailers purposely inflate the initial price, then “reduce” it so you’ll think you are getting a deal.

J.C. Penney is attempting to shed the industry’s image with the roll-out of their new pricing strategy this month. They noticed that the majority of their merchandise was selling at a discount of 50% or greater, while only 1% was selling at full price. So they decided to simplify things by reducing the listed prices 40% on average and moving to even pricing ($20 instead of $19.99). They’re eliminating almost all sales and junk mail, and are hoping this leads to greater trust from customers. I’m not sure if this will bring more people in the door, but I applaud J.C. Penney for bucking the industry trend and striving for simplicity.

A common misconception among shoppers is that larger size packages mean better value. Researchers found that the larger sizes sometimes cost more than buying several smaller-sized items. One example:

In one store, the “big value” sized stain remover actually cost $5 or so more than the cost of three smaller stain remover containers that added up to weigh the same as the single larger-sized container.

What you want to look at is the unit price. This is your key in the battle against the retailers. At retailers that don’t have unit prices, such as clothing stores, ignore the inflated original price. Look solely at the final price, and consider whether that is a fair price to pay for an item. Would you buy it if it wasn’t on sale?

For those with smart phones, there are several apps you can use to compare prices among stores. My favorite is ShopSavvy, which is available on both the Android Market and iTunes Store for free. It allows you to scan bar codes and QR codes, then see if the product is offered at a better price online or at a nearby store.

Traditional retailers are getting desperate for business amid increased competition from online retailers. This means they will continue to play games with you to get you to buy more and spend more. By using unit pricing and ignoring original prices, you can fight back and find a deal that’s really a deal.

Photo by xrrr

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