Nice pants (price) – racing to the bottom with loss leaders

JC Penney’s will be luring customers into its stores with pants priced at under two bucks this holiday season.  I do give them quite a bit of credit on that one.  Among discounted Blu-Ray players, large screen TVs, and laptops, pants at better than thrift store prices is so … ordinary.  But so practical!  If I were to try for one (or a dozen) of these, I might have a shot.  I wouldn’t have had to start lining up a week before Black Friday.

We’re all hurting.  Let’s make sure everyone else hurts more.”

I have no clue what each pair of Izod pants costs JC Penney’s.  It could be that they’re not losing a whole lot of money on those items.  But in general, loss leaders are called that for a reason:  they sell for less than cost.  The store is counting on the loss leader to result in offsetting, profitable sales.

The best line of the whole article above was from Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors:  “In off-peak periods no one is going to J.C. Penney—despite the markdowns … Traffic should be up if you’re giving the store away.”  So, yeah, people will gladly buy your dollar bills from you if you’re selling them for 75 cents apiece.

It’s a tactic, for sure.  You can strengthen your relative position in a market by siphoning sales from your competitors.  But this doesn’t imply that you can’t also be losing in the process.  You could be going down, but it’s just that your competitors are going down faster.

Do we live on loss leaders now?

For serious bargain hunters, though, the loss leaders are the only products that get bought.  And there are more choices than ever to catch wind of deals: Black Friday sites, Twitter, Facebook — and of course good old-fashioned TV.  If you’re interested in catching deals that are almost guaranteed to be costing the retailer dearly, then head to Groupon or LivingSocial.  Not only are the deals crazy to begin with, the merchants pay around half of that to the social deal site as a commission.  (But, that’s on the merchant, so why should shoppers care?)

Well, on the whole, shoppers don’t care.  Shopping is all about them, not about the store.  In a way they’re a bit like the aliens out of Independence Day:  heading from planet to planet, consuming whatever they can and moving on to the next one.  Give them a great deal, and it’s “You’re the best!”  Stop having sales, and it’s “Well, nice knowing you!”

Odds are, though, that retailers will catch up to our tricks and not let us walk away with the store.  But they do have to work harder than they did twenty or even ten years ago.

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize the good deals in life.

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