Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
In mid-June, a segment on the Today Show probed two class action lawsuits against two retailers — J.C. Penney and Kohl’s — for allegedly setting "misleading" prices. The report warned consumers to be on the lookout for "sale" prices that turn out to look an awful lot like the manufacturer’s suggested retail price.
Turns out, the story behind the story is more complicated than that. In the case of Kohl’s, an appeals court in California overturned a lower court’s ruling that now paves the way for Kohl’s to be sued in a case that centers on purchases made in May 2010. Legal technicalities aside, the court basically ruled that consumers can sue retailers for advertising prices as "sale" prices when they are actually "regular" prices, even if the consumers keep the items they purchased and even if the "sale" prices are "fair."
The public commentary is much more fun — and jaded — with many commenting, "Haven’t retailers been doing this forever?"
What does this tell me? We have entered an age of price promotion that has jumped the shark — it is a trend that has peaked and doesn’t know it yet. Today didn’t have to approach the story as a consumer alert that poked at consumers’ sensibilities. But they did, obviously because they felt it was an angle that would generate consumer interest. So it seems to me that they are at least testing the waters to see if consumers are getting tired of the relentless search for the best deal. Coupled with Americans’ apparently less-than-stellar math skills when it comes to understanding sale prices, retailers can be perceived as unfairly taking advantage of this drive.
So I’ll throw it out there to get it on the record. To me, this smells like the beginning of the end. It will only take one retailer behaving badly this holiday season and it will all be over. Don’t get me wrong, however — I don’t think this would be a bad thing. In fact, it may be exactly the thing we need to get back to rationale pricing behavior, especially as it appears the economy is carefully, slowly improving.
BrainTrust
Discussion Questions
Do you see an increasing backlash against excessive promotions at retail? What factors are working for and against a backlash?
Poll
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This will not cause a backlash against promotions. Consumers love sales and retailers will continue to give them what they want. The habit of searching for a deal will not abate. The problem for retailers is that consumers are becoming more savvy as to what is a deal and what is not. Smart phone apps, social media and price comparison websites all identify real discounts and fakes. When consumers are faked they feel injured, and when they feel injured, they sue.
Well some people are just fed up with wondering if they got the best deal. Others just are stuck with relatives that are ambulance chasers. Retail—the new place for ambulance chasers?
As a wise man once said, “You can fool some of the people all of the time and all of the people some of the time but you can’t fool all of the people all of the time.”
Yes, we will see an increase in backlash because consumers are armed with technologies that allow them to more quickly and more accurately check pricing and communicate with each other.
The clothing industry has been running crazy markdowns in the major department stores for years, and the profits are still quite good, even at 70% off, so what else is new? In my business, some stores still run BOGO items all the time, and have to charge much higher retails to do this, and guess what??? The customers still buy these deals, as it is perceived to be a great deal.
Are we going to tell stores how to promote from the government (which pays $700 for a toilet seat)???
The consumers today have all the tools they need to make a smart decision on what to buy, and how much they are willing to pay for something. So for the uninformed out there, PAY ATTENTION, as stores want to empty your wallet when you shop, either online or in a B&M store.
As I said many times, I give customers the very best prices on all my deals, and they don’t need a computer or a lawyer to figure out that they are being treated fairly. Avoid the slick snake oil sales reps, and you’ll be okay.
Customers love a deal! Retailers have trained them to shop for it and rewarded them with savings. There will only be a backlash when the deal isn’t a deal. Customers are savvy enough to know the difference and are now equipped with the tools (smartphones) to make informed decisions in real time.
Long live the deal!
Mr. Orlando has a great quote: “I give customers the very best prices on all my deals, and they don’t need a computer or a lawyer to figure out that they are being treated fairly.”
Wait. Didn’t the public just tell Penney’s to reintroduce “sale” pricing? That a gorgeous pair of capri pants priced at $17 was bad, but the same pair priced at $35 and reduced to $24 was better?
Being able to check prices any time means that consumers will be doing a lot of price comparison between retailers, both physical locations and online vendors. Comparing the price with the manufacturer’s suggested retail price may not happen as frequently, but that comparison will have a direct impact on the consumer’s perception of the “fairness” of the retailer. Sales will continue and retailers will continue to experiment with pricing strategies to give them an edge. The process now needs to include the consumer’s use of technology to compare prices in the equation.
I agree with Nikki that we are slowly creeping towards an inflection point in how consumers view promotions.
As more and more sales are now digitally influenced (and increasingly connected our our social networks), and the digital tools are increasingly effective at creating pricing transparency (decide.com, camelcamelcamel.com, etc…). The world is becoming smaller/smarter, and the old promotional strategies will become less effective.
Of course as JCP painfully demonstrated, you probably don’t want to be the pioneer with the arrows in your back, when it comes to dramatic promotional changes.
The transparency that new technology provides has to be a good thing for consumers.
It’s not just about finding the short-term best price or showrooming, but increasingly about allowing consumers to learn the values of (retailer) brands and whether they are the right fit.
I do see backlash, in a way…It will not be overt but rather over time. Today’s consumer is demanding more and more transparency and those retailers who do not give it to them, will lose loyalty.
Our smart and well armed consumers simply want to make sure that they aren’t being bamboozled. Of course they love a deal, who doesn’t, but they also don’t mind paying as long as they think the price is fair.
Retailers, just tell them the truth and they will keep you on the radar. Can you handle the truth?
Price is price. If a consumer believes that buying the product at a particular price is the right thing to do, the word “sale” is irrelevant. If the consumer buys the product because of the word “sale” then they are not too bright. It does surprise me that people can sue for being stupid.
In the end, consumers have been generally smart to the detriment of retailers’ margins. Retailers have taught their customers to wait, wait, wait until most of the margin is squeezed out of the products before they buy.
Every day in large business law firms in most major cities in the USA, men and women are hard at work reviewing opportunities to protect the interest of the average American citizen and illegal aliens…that is, I mean unregistered life-long voting visitors.
The most potent weapon available to insure protection from any form of suspect exploitation is called a “class action law suit.” Some of these actions are good and some bad. But they always cause the average innocent employee to suffer and never the villains on both sides of the litigant exchange. This is a mess creating more and more unemployment every day.
Ultimately, this is a question of fraud. If the “regular” prices don’t really exist, then the “sale” price may not offer the value perceived; hence misrepresentation. I’m not sure how to remedy this though; it’s likely that whatever is suggested—or legislated—could be circumvented by letter-of-the-law but not-spirit-of-the-law “compliance.”
On a related note, I was in a JCP a few weeks ago, and checked to see if they had in fact really pasted new and higher “regular” prices over the old, and OMG! they had; so a pox on them. (OTOH, the store itself was attractive, so I’m not sure what final grade they should receive.)
People will also be looking for deals and promotions will also get attention. The issue now is with information transparency, from a customer experience perspective, the consumer now knows when a promotion is “real” versus “fixed” and has the proof about it. Previously, you can only think you remember the price went up before a sale. Now you can take a picture of it or find it on a pricing site and announce it in social media for all to see.
Consumers instinctively want to believe they’re saving money. Last year’s JCPenney experience proved that.
50 years ago, David Ogilvy famously said “The consumer isn’t a moron, she is your wife.” We’ve since learned he was referencing our first wife who truly isn’t so bright.
The media on the other hand wants to make it a story. I believe they’ll fail because it doesn’t sell papers or interest people. There are entire industries based on this pricing model. Buy a mattress or furniture lately? It’s still about fear and greed.
If you advertise low prices, you better deliver low prices. Anything less destroys credibility and the relationship with the customer. Customers aren’t dumb. Most of them have a phone that can price-check other stores. If I’m a customer who shops based on price, after two or three times of finding lower prices elsewhere, regardless of the hype about a sale, I’m not coming back.