Tuesday, February 17, 2009

Tug Of War Between Retailers And Frugal Consumers

It is like a flu bug... frugality is now the hallmark of Americans as they churn up ever creative methods to save and buy stuff in bulk. How smart you shop has become a new status symbol. From a macroeconomic and retailers' point of view, this situation is, of course, not ideal.

Nevertheless, when the good old days of rising income, heavy debts and buying on credit is over, retailers have to adapt by delivering long-term value in their products, not empty promises.

Retailers And Frugal ConsumersPromotion strategies are also being re-adjusted to entice buyers. It is common to see banners at supermarkets screaming out slogans such as: "Go Green," "Loyalty Programs," "Value," "Best Prices" and "Local Ownership."

Like most Americans, I love buying in bulk to save money but let's not forget that many retailers have capitalized on this mentality to improve their sales, at our expense in terms of health and finance.

Some of the things which consumers get "punished" for when chasing good deals:

1. Being Tricked Into Paying Higher Prices

Buying in bulk may sound cool but it is not always cheaper, according to Frugal Dad. Supermarkets are not foolish to engage in money-losing business, so check the unit pricing before taking discounts for granted.

2. Beware of "Special Deals"

We are tempted whenever we see "special deals" but do you know that some retailers mark up their prices on such products? Or they have packaged the products in such a manner that it is difficult to gauge the actual price. End of the day, we get only minimal savings, not the 20% or 50% we are led to believe.

The stores coupons are also reserved for more expensive or less popular brands. The best approach for consumers is to shop at one store and learn its prices.

3. "Loyalty Programs"

Loyalty programs means that we are forced to pay higher prices for not joining. The alternative is to sign up and compromise our privacy, we will be inundated by offers which encourage us to purchase more, even when we have little use for the products.

4. Pay For Cleanliness

Retailers that order food in bulk often face cleanliness problems when they maximize space to accommodate their immense inventory. Rats, flies, ants, and other vermin require extra costs (to employ more staff and get in pest control) to eradicate. Surveys have found that about half of all deli and meat workers engage in unsafe/unhygienic practices.

5. ‘Fresh’ is Relative

Baby/infant food are strictly regulated but there are no federal laws mandating product dating for other products. A retailer may legally sell foods beyond the use-by date as long as the product can be considered unspoiled and safe to eat. Even repackaging is legal.

6. Impulse Shopping

Retailers have many tricks up their sleeve to get us to buy more than we plan. Sometimes a shopping list prepared in advance is not enough to restrain your impulse buys.

7. Slotting Fees

Some big retailers charge manufacturers a "slotting fee" to have their products placed in desirable locations. The fee varies greatly depending on the product, manufacturer, and market conditions.

For a new product, the initial slotting fee may be approximately $25,000 per item in a regional cluster of stores, but may be as high as $250,000 in high-demand markets. In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees.

All these fees result in increased wholesale prices which are then passed on to consumers.

8. Scanners suck our money slowly

Here we are struggling to pinch pennies, but when the price is not right, our objective to save money becomes self-defeating. You may be surprised to know that overcharging by retailers is occurring with alarming frequency.

Just ask the CBS 3I Team which investigates stores with price scanner problems. They uncovered some stores with so many violations they were actually hauled into court for making you pay too much.

One way to reduce overcharging is to scrutinize your receipt and check the weight of your items. Some stores will give you the item for free if you catch their mistake. Many consumers have already sued retailers like Target, ACME, Redners successfully, so the odds of justice being served is strong.

Retailers wish to make as much profits as possible while consumers want to save money. If everybody is being frugal now, saving money becomes even harder. We have to be alert and go the extra step of doing homework like being familiar with unit pricing and comparison shopping.


Miss M said...

I'm terrible about checking for price accuracy, I know I should do it more often. Usually by the time I notice I am home, I'm not likely to go back and dispute a price at that point.