Published December 03, 2010
Retailers run sales for one reason -- and it isn't what you think. More often than not, sales merely get you in the door, where stores easily trick you into buying more. That's the goal.
"Retailers are very skilled at stimulating impulse-purchase behavior," says Bryan Heathman, an author and consumer behavior expert. "If you can discipline yourself not to respond to impulse purchases, that's the No. 1 way to save."
Don't get suckered by sales
1. Understand the stores' motives.
2. Know the types of sales.
3. Get a feel for the landscape.
4. Arm yourself with pricing info.
5. Clip coupons for better deals.
6. Look for quality, good values.
However, buying-triggers go far beyond candy near the checkout line. When you recognize sophisticated retail ploys, you can cruise through any store -- warehouse to boutique -- with less of a headache and more money in your pocket.
Understand the stores' motives
Stores need the amount each person spends each visit, called "average transaction amount," to be as high as possible: drugstores, $15; grocery, at least $25; warehouse, topping $100. They do this by selling products with a variety of built-in profits. If you buy eggs on sale, but then grab some expensive, newfangled juice, the store wins.
Stores make less money or even lose money on individual sale items. Retailers select these crazy-cheap products, called "loss leaders," because they know you buy them often and will remember the price, says Amanda Setili, a consultant with Setili & Associates, which serves retailers and their suppliers. It's all done with the hope you'll buy high-profit items, too.
Take the $5 turkey. Around Thanksgiving, you can buy cheap turkeys, with one caveat -- a purchase of $25 or more.
Know the types of sales
Different sales generate different response rates. "The most compelling thing you can offer is something free," says Heathman. "If you say, 'Free MP3 player to the first 100 customers through the door,' that's going to get your highest response rate. The second highest response rate you get is from a 50%-off offer. The third highest is buy one, get one free."
Do the math, though, and you'll see that 50%-off and buy-one-get-one deals are essentially the same thing pricewise, even though the motives are different. One gets you in the door. The other urges you to stock up -- much like 10 for $10 offers -- whether you need to or not.
Because 50% off is a critical tipping point, assume that sales below that aren't necessarily great deals while any sale above it might be.
Still, loss leaders -- products sold below actual value -- remain the best deals. Purchase only these wild bargains and ignore everything else, and you can save serious money.
Get a feel for the landscape
Anytime you feel a sudden urge to buy, look for impulse triggers. Grocery stores, including many warehouses, use a "golden horseshoe" layout, with products that are needed most shelved down the sides and across the back of the store. This setup requires shoppers to walk past numerous traps. "While there is a lot of dollar volume generated in those horseshoe areas, profit margins are driven more by impulse purchases," says Heathman.
Grocery store speed traps
* Around big family/food holidays, look for impulse traps near meat freezers and in the baking aisle.
* Before Valentine's Day, avoid extra displays in the card aisle.
* Super Bowl Sunday and July Fourth are huge chip and soda sales times, so watch for impulse traps on your way to buy snacks, which typically are impulse items at other times of the year.
Retailers design the front third of a grocery store for impulse buyers, but like highway speed traps, triggers sometimes pop up in other spots, usually as temporary cardboard displays.
The same is true in other stores. It's no coincidence retailers put clearance sales at the back or commonly needed merchandise on tables -- rather than shelves or racks -- just inside the door or in major aisles. Items displayed on tables sell much faster. "People are more likely to impulse shop from a table," says Lynn Switanowski-Barrett, a retail consultant with Creative Business Consulting Group.
Arm yourself with pricing info
Stores serving America's middle class typically choose one of two business models, Heathman says. Either they offer good everyday pricing on most items, which encourages consumers to shop more broadly and assume all items are a good deal, which isn't necessarily true or they run nearly constant sales that get bargain hunters excited, even if the bargain is an illusion. Big-box, discount retailers fall into the first category; many department stores and most jewelry stores fall into the second.
The trick to shopping at everyday value stores is knowing how much things cost. Then, you might buy most of what you need at one place, rather than burning time and gas chasing down bargains.
Stores built on a more promotional strategy take a different approach. They don't expect to sell most items at full price. The pricing structure gives the illusion of a bargain when in fact the sale price is actually what they intended to sell the item at all along and still be able to make a profit. Coats, for example, rarely sell at full price.
The same is true for private label or designer brands sold exclusively at low- or midlevel stores. If you see a line from a big name like Liz Claiborne or Vera Wang at an average department store, it's manufactured to be less expensive from the get-go. You are not buying the same nearly couture designer items sold at high-end stores.
So, never buy anything for full price at stores like this. And know that most sale prices at or below 50% are more likely the true regular price for those items and perhaps no bargain at all.
Clip coupons for better deals
Manufacturers often drive coupon offers, especially in the grocery market. They decide what goes on sale when and for how much. "Some would call it a partnership. Some would call it adversarial," says Heathman, "but there is a relationship."
Manufacturers buy coupon space in the Sunday circulars and pay the retailer the difference in price. But they have to pay stores only when coupons get redeemed. That's why coupon deals are often better than other kinds of sales. Not everyone uses them.
Many people ignore, lose or forget to use coupons. Even if you love coupons, maybe that $3 off isn't worth the time to drive home to fetch the forgotten coupon, so you buy the item anyway. That coupon still got you in the door, so the store wins.
Look for quality, good values
Products that cost more spawn greater consideration and comparison shopping, Heathman says, so you are far less likely to find drastic price differences or huge markdowns on something like appliances compared with everyday items that cost much less but get purchased more frequently by more people.
Certain high-profile or luxury items value what's known as "brand equity" over big bumps in total sales. Heathman says the prices are set high purposefully to maintain the prestige of a brand's reputation. Certain fashion brands, especially purses, and some electronics brands use this model. Unless something is from last season or has been replaced by a new version of the same thing, you'll never find them on sale.
The other side of this no-sale philosophy is that some retailers sell great quality items for what they are truly worth, says Switanowski-Barrett. If you want something that never goes on sale, look at how the retailer stands behind products, she says. If they guarantee something for life, then even if the price seems high on an individual item, the service and support may make the cost worth it.
The truth is that a good buy involves an item you need at a price that makes you feel good. It simply helps to know that sometimes retailers fool you into feeling better than you should.