retail news in context, analysis with attitude

Interesting piece in the New York Times that uses JC Penney's apparently failed attempt to switch from coupons and price promotions to EDLP as a springboard to discussing why customers respond to sales. "Most shoppers, coupon collectors or not, want the thrill of getting a great deal, even if it’s an illusion," the Times writes.

Economists and marketing experts say "that consumers are conditioned to wait for deals and sales, partly because they do not have a good sense of how much an item should be worth to them and need cues to figure that out," the Times reports, adding, "Consumers infer that they get a great deal based on the reference point provided by the higher, presale price. Social scientists refer to this idea as anchoring, and it applies to all sorts of consumer behavior and expectations. Without that anchor, consumers have trouble determining whether the store is actually giving them a good price."

EDLP can only work if retailers are willing to accept narrow profit margins, the Times writes: "Costco, for instance, almost never runs sales and doesn’t adjust prices much, but it depends on annual membership fees for profit. Walmart, which also offers low prices, makes up for thin margins with a high volume of customers who visit often."
KC's View:
William Goldman, the screenwriter, famously said that in Hollywood, "Nobody knows anything." The same thing seems to go for pricing.

I've made this argument for a long time - that it is both a cultural and economic problem in this country that nobody knows what anything costs, which means that implied value may be completely illusory. This strikes me as a shaky foundation on which to build a culture and an economy.