At some point during bargaining the seller will pull out this line or a variant, I’m selling this at a loss. I know it’s not true most of the time, but is it ever true? Should I believe him?
Sure, it sometimes is, because selling at a loss is sometimes preferable to writing off the entire cost.
Depends on a lot of factors, including the nature of the item, the current market, and the urgency of the need for cashflow for the seller.
There’s also the possibility that they are trying to drive a smaller rival out of business by selling at a loss. They’ll jack up the price once the rival is gone, naturally.
And of course there are potentially extras that can be added later.
Last year’s fad, that the retailer paid $10 a piece for, might have sold at $20-50 a piece last year…but this year, nobody wants the things even at $10, so the retailer will mark them down to $7.50, and then $5, just to get them out of the store to make room for new merchandise. Regular shoppers will know if something has been hanging around the store, plus of course things get shopworn from being handled.
Believe him. Don’t believe him. It doesn’t matter. Parties regularly misrepresent their bargaining position. Does the salesman really stop to think if you truly can’t afford any more?
They will have decided how much they can sell a product for. If the price is less than that, then they usually won’t sell it. The purchase price is not the final determination, it is one of several factors, one of the largest of which is their confidence of someone else out bidding you.
He could also be trying to build a relationship with you - sell at a loss this time, at cost another time, just to keep you coming back, so he can keep selling to you, sometimes at the regular markup, sometimes at less painful discounts, whatever it takes to keep selling to you (so long as it doesn’t have to stay ‘at cost’ or ‘at a loss’ the whole time, at which point it fails to be worth it to him).
Certainly it happens as others above have noted. It can also mean that the salesman has currently come down to the absolute minimum he or she can accept in margin. Technically he’s still “making money” on the item, but only enough to cover his overhead or operating costs, etc. He is breaking even on the deal. However, that statement alone is no particular reason to believe them. You’ll have to weight that based on your interactions with the person. Generally speaking, if that statement is pulled out after coming down a few times in your favor, they are either serious, or tired of dealing with you as they are nearing their bottom point anyway. Negotiating is an art, continuing to beat on sales staff only works so much.
This is especially true for items that have a recurring cost associated with them. This isn’t a particularly good example for the kind of high-pressure sales you’re talking about, but manufacturers will often sell printers for below cost, then program the printers to only accept “brand name” toner cartridges, and then sell the toner for significant mark-ups. The same is true for video game consoles that are sold below cost, with high mark-ups on games and accessories.
So if a salesman thinks he can get you back in the store by selling at or below cost and make up for the loss with subscription fees or maintenance contracts or add-ons or accessories or whatever, then sure, why not?
For seasonal items it can be cheaper to sell it at a loss than to eat the cost of storing it for another year, especially since it probably won’t look any better after being mothballed for eight months.
I think that sometimes people who work on commission will forgo their commission if they have other incentives to make sales.
When I bought my car a few years ago, I got a really good deal and I wouldn’t be surprised if they didn’t make any money on it. It was the last day of the month and they didn’t have the trim level/color combination that I wanted, so they sold me the next trim level up (normally maybe a $1000 increase) for about $150 more. This was a price that was a few thousand less than I had been quoted at a few different dealerships. I suspect that the lady and her sales manager really wanted to get another car sold for that month in order for their sales numbers to be what they wanted.
A loan officer at a bank pulled this on me once. My then-90-year-old mother decided she wanted to refinance her mortgage, even though she had only 50k left to pay on it, and the new rate was less than 1% lower. She was having some problems with the loan manager, so she asked me to come with her.
The loan manager was a real prick, and kept whining about how he wasn’t making any money on this loan. I just looked at him:
“Do you really want to tell us that? Every dollar you make on this loan comes out of her pocket, so we really don’t want you to make any money at all. If you aren’t making any money, it means we are doing everything right.”
Sometimes they just don’t think about what they are saying.
You can see this too for situations where someone is moving soon (new job or whatever else) and they have things that they can’t take with them (house, car, etc.) Better to sell for a loss and eat the difference than to not sell at all and be paying to maintain something you can’t use (mortgage/car payments, taxes, etc.)
You see this sort of thing on military bases, actually. Shipping a car is expensive and not always entirely practical, and you have a hard deadline to report to your next duty station or face the (severe) consequences. I’ve known more than a few guys who ended up being at Base B while continuing to pay for their car at Base A because they couldn’t sell it in time (meanwhile, one of their friends at Base A was hopefully armed with a Special Power of Attorney and trying to sell the car for them).
The margins on new games are often razor thin, so this isn’t really a good example. GameStop sells so many used games because the margins on those are a lot better, which has nothing to do with the manufacturers (and actually makes the manufacturers furious).
Sometimes the ‘i’m not making any money on this’ means that they are not making any extra money on it but just a expected and usually small markup - which they take as no profit, but just costs and overhead and even sometimes a small profit percentage.
Either way, it’s not my problem. How much I pay for something is based on my own economics, not the seller’s.
You won’t hear anyone in a supermarket say they’re not making money, but supermarket routinely sell their specials at a loss, or will even price articles that a lot of customers routinely buy (like soda) below cost, hoping that customers will come for these low priced items and then stay for all the other stuff that’s there.
I’m not sure I understand your story. You thought it was gauche of him to point out that retail banks are not in the business of losing money on loans?
Gauche? Not the word I’d have chosen. But I told him if he didn’t like the terms, he could always return her $700 application fee and back out of the loan. He didn’t want to do that either. So it seems oddly naive to complain about the terms by telling his client they are getting such a good deal. We are less likely to turn down a loan so obviously in our favor.
He was as low as he was inclined to go, and didn’t want you to back out, so he made you think that it wouldn’t be worth your trouble to go somewhere else.