As an investor, founder, CEO and business book author, I write about startups, design, how to build a good business, and I like to muse about culture in any form.

Paying Full Price is for Saps

“I never pay retail.”

“You wouldn’t believe what a deal I got on this.”

“I’ll wait until it goes on sale.”

If you are talking about last season’s clothes, or giant boxes of Cheerios, or a car, or a great product in an unpopular color, or a laptop model that is about to be upgraded, these are reasonable positions.  There are huge categories of products that have margin structures and lifecycles that support deep and regular discounts.  You ARE a sap if you don’t get the best price you can.

But if you are also the kind of person who loves new technology, or getting your hands on the latest clever invention, or you want to support sustainable products or entrepreneurs just getting started, or you appreciate having vibrant local (and even big chain) stores in your town or city, discounts become a much more complicated conversation.  Why?

Mainly because new products and/or young companies have not reached a scale or efficiency to immediately begin discounting.  If anything, at Grommet, we see too many entrepreneurs underpricing their products.  This has two effects.  Either they can’t cover their costs.  Or, if they are selling direct, they are setting a market price that does not allow for scaling via other retailers who need to make their own margin.  Either outcome spells death.

When it comes to online discounts, there’s another level of complication.  Namely, “showrooming.”

The television industry is recently fighting the pervasive discounts threatening both the manufacturers and retailers like Best Buy and Target.  Last week Sony and Samsung announced unprecedented new pricing policies–taking a page out of the Apple playbook.  “If you want to carry our product, you have to respect our prices.” The Wall Street Journal did a nice job covering this news.  Here’s an excerpt that pretty much covers it:

“This allows us to make a reasonable profit,” says Billy Abt, co-president of Abt Electronics, one of the country’s largest independent consumer electronics retailers. “It got to the point where we were selling $2,000 TVs and making $10.”

Even a fourth-grader can do the math on that one.  Now it’s time for the adults who control our economy (you and me) to stop deluding ourselves that someone else is paying for these unsustainable discounts.  We are all paying when we kill whole industries and our local retail.

2 Responses to “Paying Full Price is for Saps”

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