From a retailer’s perspective, it doesn’t make much sense to deliberately take a loss on its products. After all, they’re in business to make a profit. So how does it benefit a retailer when they offer ‘buy one, get one free’ deals? Are they just cutting their losses, hoping to sell enough to make up for it? This is something I pondered as I took advantage of one such ‘buy one, get one free’ sale at my local department store this week.
The Customer’s Perspective
I follow my local stores’ sales pretty closely. Although there are occasional “percent off” sales, ‘buy one, get one free’ sales are rare, especially on high-ticket items like furniture, luggage, bedding, and home decor.
But last week when I skimmed the new electronic ad featured on one of their apps, I did a double take. The store was offering buy one, get one free deals on exactly those items! The inclusion of cookware and luggage caught my eye, because they were purchases I was already considering. Taking advantage of this deal saved me $80 on a piece of luggage and $40 on a higher-quality skillet I needed. Who doesn’t get excited about that much savings?
Of course, there is the potential during these kinds of sales to get so caught up in how much money you’re saving you forget there’s also money being spent. Oh, yeah. That. Avoid this pitfall by asking a few questions:
- How will the items be used – by you or as gifts? Do you need them, and have the space?
- Are they items you were planning on purchasing in the near future, anyway?
- Do you have the funds in that budget category?
By answering these questions, you can spend with a clear conscience while saving money too.
The Retailer’s Perspective
Taking advantage of these sales makes sense for the consumer getting the free item, but how does it profit the retailer? They’re knowingly losing all profit on one entire unit, each transaction. Here’s what they might be thinking:
- You won’t shop anywhere else. Retailers are willing to accept a little initial loss if it means their discounts are better than the competitions. This means you’ll be heading straight to their store, and will buy other items while you’re there. You see how this would make up for their loss in profit!
- Limited-time sales create a sense of urgency, encouraging customers to buy now, not later (or never). An effective strategy for curbing your spending is to wait before you make a purchase. Nine times out of ten, you’ll decide it’s not something you really need or want, after all. This works against retailers, of course, who benefit from your impulsiveness. Offering limited-time, almost-too-good-to-be-true sales is one way they can get you to buy now, using the logic that you’re saving money.
- Items are often over-priced, as it is, and over-stock needs to be eliminated. You may notice that only certain brands are included in buy one, get one free deals. These are often cases of excess inventory. What better way to move a bunch of dead-weight stock quickly? Any loss in profit-per-item is more than made up for by freeing up inventory space for better selling items.
Make It A Win-Win
It’s important not to get swept up in a ‘good deal’ that is actually increasing your spending. At the same time, it makes sense to time your shopping in a way that allows you to make your money go further. For instance, if you notice sales tend to happen every six months, wait for another sale before purchasing an expensive item you need. This way, both you and the retailer win… but you win more.
What are some of your best buy-one, get one free deals?
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