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 Post subject: Re: Sales and pricing psychology
PostPosted: Mar Tue 06, 2018 6:40 pm 
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Joined: Dec Thu 06, 2007 11:54 pm
Posts: 2873
Location: Hayward, California USA
My new J.C. Penney jacket was more than 70% off, including an extra discount with their credit card. No, I doubt anyone ever really paid $160 for one of them, unless they were in a hurry or they never watch prices. But, the $36 I paid is a lot less than similar jackets everywhere else I looked, and that is always the key: Don't go by "discount", go by value and know what you are shopping for.

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 Post subject: Re: Sales and pricing psychology
PostPosted: Mar Wed 07, 2018 3:07 pm 
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Joined: Sep Wed 03, 2008 1:24 am
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Markup is always calculated based on the cost of the goods to the store. Margin is calculated based on the selling price. An item that costs the store $50, but is priced at $100, is said to have a 100% markup and a 50% gross margin. From the gross margin comes the costs to operate the storefront, pay the employees, pay the taxes, and cover inventory loss (spoilage, damage, theft, etc.).

For a large retailer like Target, their gross margins hover around 30% (which translates to a markup of around 50%). Net margin is around 3-4%. Small retailers have it even tougher, as they don't get the breaks from the wholesalers that big box retailers like WalMart and HomeDepot get. Margins for jewelry are higher as noted above; however, jewelry moves off the shelves much slower than boxes of cereal, and the inventory cost of carrying jewelry is real (loss insurance premiums are very high).

With regards to pricing, it's amusing to me to read the ads from companies like Harbor Freight where they show the "regular price" with a line through it, and a "sale price" that is often half that of the regular price (if not more). What they don't tell you is that the item never, ever sells for the "regular price". Many states have laws that state theoretically forbid this practice; the item is supposed to at least periodically sell at the regular price in order to be advertised as a discount. However, such laws are almost impossible to enforce, and most states don't have the budget to go after big retailers in court anyway.


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