Date posted: October 3, 2012
Most people like the idea of buying things at bargain prices. N.C. State University economist Mike Walden takes a look at why sales occur – and whether they always bring real savings.
“And … it’s interesting. Some stores now are going a different route with respect to sales. They’re actually saying, ‘We’re not going to have sales. We’re always going to have low prices.’
“But historically, there’ve been a couple of reasons why we’ve seen sales: One is to clear inventory. You’re at the end of a season, like now we’re at the end of summer. Stores don’t want to hold onto their summer clothes, for example, because (it costs) them money to put those in storage. So, they want to have a sale to clear out.
“A problem there, of course, from the buyer’s perspective is that the selection may be limited. So if you do wait to do all your summer buying at the end of the summer, number one, you’re not going to have those clothes to use during the past summer. Number two, the selection may be limited.
“Another reason we often see sales is sales are usually what we call lose leaders. We sometimes see those in … grocery stores and supermarkets. It is when we put something on sale, like bread. The store is losing money on that bread, but they’re using the lure of cheap bread to get people into the store, knowing that most people are going to buy other things when they buy bread that’s on sale.
“You do have to watch to see if sales are gimmicks. Sometimes you’ll have a promoter first raise the price and then cut the price and say there’s a sale. And it’s really not. So you do have to beware. But sales can be legitimate for a couple of major reasons.”
Category: Economic Perspective