Ok, Macy’s always seems to have a special sale where they heavily discount (at least percentagewise) the list price.
Here is my genius logic, please help me: Few people will buy at Macy’s at list price, because there are so many sales. Since Macy’s sells few items at list price, they must be making the vast majority of the sales at discount. This means, for them to stay in business, the actual cost must be lower than the sales price, which is already substantially reduced.
So that would mean Macy’s lists Ralph Lauren ever-present polo shirt at $60; sells them on sale for $30; but they must have bought them for say, $20? Could the margin originally have been that high? Then what does it profit macy’s to have tons of inventory at full price, where little of it is bought?
But what kind of pricing model is this? Why not just stop the sales and have ‘everyday low prices’ like the more modern business practices of say Walmart?
While anecdotes sadly are not logical, I personally don’t know of anyone who pays full price for anything at Macy’s. If you have money and dont care, usually you go across the mall to Nordstrom’s or better yet, Needless Markup.
Normally, when Macy’s - or any other mall store, since most do a variation on this - has a sale, not everything is on sale.* Lots of stuff, including all of the best stuff, is full price. The sale is just to get you into the door.
The stuff that is on sale was probably at full price at one time. After it got picked over and the most popular sizes, colors, and styles purchased, the rest is marked down to get it out the door to make way for more profitable items. Yes, people really do pay full price, whether you personally know them or not. You don’t know 0.001% of the people who shop at Macy’s.
Standard markup on items is 100%. So that $60 item was probably bought for $30. It have have been somewhat less or somewhat more, depending on particulars. Even so, if it’s been in the store for a while, which would you rather do: sell it for $20 or throw it out and get nothing?
And Macy’s is the highest quality store in at least half the malls in America.
*Check a catalog or sales coupon to see how many items, and even whole departments, are excluded.
Apparel has one of the largest mark ups around. For tiny little independant dealers (I did buying for one) mark-up was indeed 100%.
Mass retailers like Macys buys for even way less than that. Those $80 Ralph Lauren shirts are probably bought for around $15-$20 or even less by Macys.
For my wedding we were registered at Macys and at Bed Bath and Beyond.
Both stores have a bunch of the exact same thing. They even have some of the same lines of home-goods.
One thing I noticed going back and forth between the two is that the sales price at Macys is often the regular price for the exact same thing at BB&B. Sometimes even a few bucks more.
So, the answer is that it’s mostly marketing. People want to feel like they’re getting a deal and they might feel more inclined to buy something impulsively if the sale only lasts for two more days!!! Of course the same sale starts again in a week.
Have you ever looked on the back of those 20% off everything cards to see all the things the card does NOT apply to?
When I worked there, a couple of things got so marked down that I’m pretty sure they had to be seeling them at cost. Fifty percent plus an additional 20% plus an additional 15%…and of course there were a lot of things that never got sold at all.
So yeah, the markup is huge.
Also, if it says “Regular price $50,” that means it must be offered for sale for that price for a certain amount of time. So when I worked in fine jewelry, for instance, most of the stuff was on sale, most of the time, but there would be two-week periods when nothing was on sale except the items in the closeout case. Oddly enough, we would get some merchandise in that went straight into the closeout case.
When I worked at a women’s clothing shop, I did a lot of the intake, and I saw the purchase orders. Most of the stuff we got in was purchased at the regular price, at the start of the selling season, and we’d mark this up 100%. That is, if the buyer ordered 5 dresses, and paid $25 each for them, they’d be marked at $49.99, which was considered to be a mid price item for our store. At the END of the season, though, she’d be able to buy those same dresses for $5 or $10 each, and we’d either mark them at $49.99 and put them in our regular racks, or we’d mark them at $19.99 and put them on the “Special Sale” rack (we had one for twenty dollar dresses, one for forty dollar dresses, and one for ten dollar tops and bottoms). If we’d had that particular style and color of dress before, we’d mark it at the same price as before, and if we hadn’t, we’d put it on the sale rack. Now, we’d occasionally have sales on the regular priced merchandise, depending on the season.
However, the buyer was always on the lookout for closeouts and other special deals. She managed to buy a bunch of thin pullover sweaters for $2.50. That’s right, two and a half dollars. She then had the brilliant idea to price these cheap sweaters at $74.99, and we actually sold some of them at that price. Every time we had a sale, though, those sweaters were sold at a third off, or half off. And that’s one way to have spectacular savings on certain merchandise…just jack the price up unrealistically, and if you can get a few sales at that full price, hey, profit. And you can then slash that price dramatically, and get people who are looking for a bargain to pay a price that’s STILL way above the normal markup.
And I suspect that this is what Macy’s does, most of the time. They run the sales to get people into the store to look at stuff that’s still overpriced.
Similarly, I’ve noticed that Hobby Lobby is ALWAYS running a special on their furniture, it’s always 30% off list price. Every week.
Macy’s always has a virtually perpetual sale going on. It’s simply their sales model. Many people have become so inured to it they only shop the Macy’s sale prices and closeouts period.
And more stuff… sales of particular lines are often in coordination with the label/manufacturer, who may either sell Macy’s a run of a given product at a deeper discount, have an agreement to buy back at cost all unsold merchandise, or will kick back to Macy’s markdown money to cover the cost of the sale and promotion. Ralph Lauren may be eating some of the cost of a sale on its Polo products, while Estee Lauder could strike a deal to accept overstock returns for a promotion of their fragrance lines, etc.
Accessories, coordinating items, and side purchases. They might be making $5 less in profit on a sale on mens’ pants, but they could pick up $10 if you buy a belt to go with it, or $15 if you notice the mannequin wearing the pants has a cool sweater that matches well and buy it, or $30 if you happen to notice the new cologne on the way out of the door with your discount pants.
A good book that deals in this phenomenon is Dan Ariely’s Predictably Irrational. The book is about a whole lot more than that, but it mentions bread making machines for instance.
When they first came out they sold poorly as people had no frame of reference for them. So the marketers told the manufacturers to make high end models. Once people could do a price comparison they were able to rationalize spending money on a bread machine.
Thats all a sales price does: it suggests an alternate price for an item. This lets people put a scale value to their want.
It works in non monetary situations too. Would Coca Cola like to push Pepsi out of business? Not entirely. The competition allows people to have a favorite cola, totally disregarding the fact that they both taste like malted battery acid.
I buy stuff at full price all the time because I wear a size that is either extremely common (so they sell out first) or extremely uncommon (so very few are made), I haven’t quite figured it out. If I don’t buy it when it comes out at full price, I’ll never find one that fits. I regularly search 15-20 racks of pants and find either none or one in my size (31 or 32W, 30L), but if I had a 36 or 38 inch waist I could buy 20 pairs. Consequently, if I find something that fits, I buy it even if it’s full price.
Also, the quality of things you get at Nordstrom for lots more is much higher than what you’ll find at Macy’s, in my experience.
I assume that the sale prices still fetch a substantial profit. That’s how it works with car dealerships, at least.
Saying something is on sale is itself a way to get people to buy. It’s similar to those ads on TV that say that something should cost $200, but, for a limited time, if you call in the next 20 minutes, you can get it for @19.95.
“Always low prices” would make them like Walmart–make the store seem cheap.
Yup, very true. I get a decent-sized Macy’s gift card every year as a present, and I usually buy stuff in their kitchen section. The sales prices at Macy’s might be equal to, or a bit more than, the regular prices at your average housewares-type store. If you buy anything not on sale, be aware that it’ll typically be marked up heavily over what you could buy at most other stores.
Also, Macy’s sales ads and coupons typically have a whole ton of fine print that goes on and on about what departments/lines/etc are excluded from the sales. After reading some of their coupons I found myself hard-pressed to think of anything other than their “house line” that would be included in the deal.
Here’s my perspective, from having worked in the corporate office of another large retailer:
1.) Sales are constantly cycled through departments. As I understand it, you are *legally restricted *in the proportion of time you can have a certain type of thing on sale. E.g., to make something up, you can’t have housewares on sale 75% of the time and still call it a sale–you’d just have to make that your normal price.
2.) Yes, the markup really is ridiculous. Exactly how ridiculous varies from item to item, and even for the same item based on when it was purchased. (See Lynn Bodoni’s post for a buyer’s perspective.)
3.) They don’t permanently lower their prices and eliminate sales (i.e., resulting in the same profits assuming that people’s purchasing patterns stayed consistent) for two reasons:
a.) Cachet. What sounds more impressive: “I bought this at K-Mart” or “I bought this at Macy’s”? Their branding depends on a certain amount of reputation for being more expensive (of a higher quality).
b.) Sales drive, er, sales. Which is to say, people spend more money when they feel like they’re getting a bargain.
I really wonder if Macy’s, now that they’re the main department store nationwide, has different tiers of “class”. Around here, the Macy’s stores seem pretty damn crappy. There are a few corners of the store with (way) overpriced fancier stuff, but most of it is the same kind of crap I can get at Kohl’s or Penney’s for cheaper.
Macy’s bought out Marshall Field’s, who bought out our beloved Hudson’s. While I disliked Marshall Field’s on principle ;), they were much better quality than Macy’s. I still know people here who hold onto Hudson’s hangers and boxes, though. No one does that with Macy’s.