Be wary of Markdown Prices
September 24, 2021
Reducing prices of products relatively garners more interest from consumers. Each year, businesses employ different tactics or strategies that ensure more units of a product is sold to boost revenue. These can include discount sales, benefit promotions, and markdown pricing to name a few. In a research paper titled: “Effects of Price Discounts on Consumers, Perceptions of Savings and Quality”; researchers Jung Lee and Jessie Chen-Yu, describe that there is a corelation between the price of a product and its perceived quality. When prices are high, consumers perceive that the quality of the product is high. So, when these prices are reduced, consumers will jump on the chance to purchase products that are perceived to be of good quality and at a relatively cheaper price.
Markdown pricing is very common in Fiji’s supermarkets. Consumers see labels that signify a change in price and can change plans instantly because they choose to take advantage of what they perceive as a great bargain. This however, is not always true as consumers are sometimes on the losing end when taking advantage of markdown pricing.
What is markdown pricing?
A markdown relatively adjusts the price of a product to reflect the price a consumer is actually willing to pay. It is essentially a devaluation of a product. If sales do not increase after the first markdown, businesses may find it necessary to continue marking down the product until it sells at an acceptable rate that will still yield profits.
Ideally, businesses employ this strategy because it is commonly seen that people tend to buy more when there is a drop in the price of the product. This decrease however, does not mean that businesses are selling at a loss. Instead, they are selling products at a lower profit margin.
This mostly occurs however, when businesses seek to clear stock or attempt to sell off damaged goods, or good near to its expiry dates. It is imperative therefore to consumers carefully consider their purchases in these scenarios.
Types of markdowns pricing
There are several reasons that influence a company to use markdown. All of these relate to managing inventory. The types of markdown pricing consumers should be aware of include:
• Clearance markdowns – If a retailer does not plan on restocking an item, it would be more cost-efficient to sell the product at a reduced price than to pay for storage. By reducing the value of the product, clearance markdowns speed up sales and get rid of excess inventory.
• Damaged goods markdowns – If a unit of a product is damaged, it is unlikely companies can sell the item for the same prices as a non-damaged product. It is therefore common to reduce the price of any spoiled or defective goods.
• Competitive markdowns – This is also known as price-matching where a business reduces the price of a product to match its competitor’s products. If two companies sell the same product at different prices, the company with the higher price is likely to sell less.
• Expired or nearly expired products markdowns- It has been noted that it is a common practice adopted by many supermarkets to sell off items that are nearly expired, or items near the expiration date. They sell these items to consumers at low prices. These are most commonly placed near the checkouts, which leaves customers’ final experiences focusing on the leftover before cashing out their shopping. These markdowns are usually heavily discounted to get rid of the products.
Damaged and expired goods markdowns, a Council survey
Recently the Consumer Council of Fiji conducted a survey on markdown strategies employed by supermarkets across the country and discovered that for some businesses, markdowns were usually associated with the attempt to sell off damaged or expired products. Some of the notable issues discovered include:
• Sale of sealed products beyond use by date – these dates usually concern safety: food should not be eaten, cooked or frozen after this date, as it could be unsafe – even if it has been stored correctly and looks and smells fine. After this date, products cannot be regarded as marketable. The Council’s survey showed that some businesses continued to sell products well beyond its use by dates and unsuspecting consumers may have purchased the product.
• Sale of products with incorrect labelling and missing manufactured and packaging dates – consumers are unaware of how long the product has been on the shelves when manufactured and packaging dates are missing. The shelf life of products therefore cannot be ascertained. The Council’s survey showed that many items did not have manufactured dates so the shelf life of the product, although with expiry dates listed, cannot be accurately determined.
• Sale of spoiled and damaged foods – the Council’s survey showed that businesses markdown perishable items that have exceeded their shelf life or are just a day away from expiry in a bid to make profit. Consumers who are influenced by the reduction in price may not necessarily check the quality of the food, hence lose out on their hard earned money.
Tips to look out for when purchasing markdown items
• Always look at the best before, expiry or use by date in order to determine whether it is safe to eat or not.
• Avoid food items that have presence of mold and fungal growth.
• Do not buy in bulk even if the price is lucrative. Buy only what can be consumed before the expiry date.
• Avoid buying marked down fruits/vegetables that are pre-packed and sliced. These items may have the rotten or bad parts removed and then re-packaged for sale. Opt for buying whole foods.
• Always check for the quality of the items where possible before purchasing it.
Consumers facing issues are urged to contact the Council on toll free number 155 or email firstname.lastname@example.org. Alternatively, consumers can lodge complaints via the Consumer Council of Fiji Mobile App (available for download from Google Playstore)