Friday, January 08, 2010

By 

James W. Stone

If I were a retail merchant and had inventory on my shelves during the first week of January, I would want to sell it. No different from any other day my store would be open — I want to make sales. That's what stores do to stay in business and turn a profit for their owners. But selling during the month of January is a little bit different than other times of the year.

Right after the holidays, customers have been in a "shopping" mode for a month. These customers have been hovering over certain items waiting for the price they felt offered them a bargain deal. Although they needed to buy gifts in time for the holidays, they developed a certain stimulus/response behavior to the word "SALE." Just like Pavlov's dogs salivated when the dinner bell was rung, when you mention "sale" in January, customers start to reach for their wallets.

Merchants have been in a "selling" mode for that same month. They knew they had to fill the shelves for the seasonal "SURGE" of buying that happens during December. There is a delicate balance businesses must maintain for this selling opportunity. If you don't have merchandise on the shelves, your shoppers will remember you as the store that didn't have what they wanted to buy. So, merchants carry a larger than normal inventory of many goods during December. The idea is to sell a lot, don't run out of anything, and don't have too much left over.

When January comes, shopping turns from that phase where customers must buy for the holidays, to the phase where the customers will buy if the deal is right. But it is important for merchants to get inventories back to manageable levels after December.

In order to reduce inventory, we expect merchants to sell at a severe discount. We, the customers, expect merchants to price the sale items based on the need to avoid carrying charges for unsold goods or being stuck with out-of-date inventory like seasonal decorations. Merchants are still trying to make as much money as possible and can't afford to give away merchandise. They only have to price the goods at a point where the customer thinks it's a good deal, and the competitor is charging more.

So, where does this leave you? How will you react to seeing a "SALE?" Here are some good points to consider before you react:

1. Are you really in the market for what is on sale? I mean, are you likely to buy the item in the next few weeks whether the item is on sale or not?
2. Are you responding to the sale, or some other driver? You don't save money buying anything that's on sale unless it is something you are going to use. Some people have clothes hanging in their closets that were bought on sale and never worn. Those clothes were bought because "They were on sale!"
3. Is what is on sale really the same product that was available without the sale? The "SALE" terms will often take away the opportunity for returning something for credit later. Sometimes the package has been opened by a previous customer. Always consider how the item on sale might be a "distressed" sale.
4. Some sales might be a planned "EVENT." The merchandise on sale might be special merchandise purchased for the event, rather than overstock from the holiday frenzy.

Often, a sale is a good opportunity for the careful shopper to buy something they need. If the shopper is familiar with the product and the way it is usually sold, they're in a good position to know if the SALE is an opportunity.

Sometimes, a sale is just part of the merchandising hype. If a product was introduced for the holiday shopping season and given a high initial selling price, maybe it didn't sell as well as its makers had hoped. Now they have to cut the price to move it off the shelves of stores. And just as likely, the price may drop further in the next few weeks. The initial price (especially for highly advertised toys) isn't really a fair market price. It is the manufacturer's best guess at how much they can get for the item.

The best way to determine if a sale is right for you is to ask yourself how much you will benefit from a product you buy at the sale price. Yes, that is the same question to ask yourself for any purchase when you are trying to get the best bang-for-your-buck.

James W. Stone
(follow me at http://twitter.com/theJamesWStone)
Copyright 2010, James W. Stone, all rights reserved worldwide