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Is Being Cheap Ripping You Off?

by Ouida on July 23, 2010


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Okay that is such a clumsy title for a post,  but there it is.  I am still reading Ellen Ruppel Shell’s Cheap:  The High Cost of Discount Culture.  Ms.  Ruppel Shell’s premise is simple, our quest for low prices is anything but harmless.  We pay for it in damage to the environment and the ultimate loss of craftsmanship and quality.  Cheap goods allow us to move toward a throw-away society.  Charles Fishman argues in The Walmart Effect that Walmart makes sells cheaply-made lawnmowers so cheaply that you’d never think of repairing one, you’d simply replace it when it breaks which it is likely to do each and every year.

The abundance of cheap goods has masked the very real problems of inflation and wage stagnation.

I love getting a good deal, but I love getting a good deal for a quality item.  The problem is that much of what we buy is low on quality.  The most enlightening chapter of Ruppel Schell’s book is the chapter entitled, “The Outlet Gambit.”  Premium outlets are designed to  get you to part with your money while connoting value.  The problem is that the reference prices on which the discounts are based are fiction and many brand leaders manufacture lower quality products specifically to sell in “premium outlet” malls.  Ruppel Schell and Dr. Gillian Naylor, marketing professor at the University of Nevada, Las Vegas College of Business, travel Las Vegas malls with Dr. Naylor distinguishing between quality and garbage merchandise and, more importantly, whether or not suggested retail price is truly reflective of a product’s quality.  More often than not the answer was no.  Rupel Schell writes, “Given this assiduous attention to value, Naylor’s opinion of outlets is worth noting:  She uses them, but sparingly. She prefers department stores which she said generally carry better quality merchandise at prices that are frequently lower than outlet levels.”

This book has merely confirmed something that I began to suspect long ago:  That manufacturers use the allure of outlets to unload inferior merchandise that they make specifically for the outlet. The Coach belt that I bought at the Premium Outlets mall outside Santa Fe, pulled apart within months of purchase and the Coach leather coat, that I paid a pretty penny for has loose stitching and the beautiful rich brown color that I found so attractive on the day of purchase is coming off after only one season of use.  I have vowed to never return.  Coach Premium Outlets is selling junk and if they are doing it in Santa Fe, they are doing it in your neck of the woods.  The implication in Cheap is chilling:  by shopping at an outlet store, you could end up paying $300 dollars for a suit that is really only worth $200 dollars at full retail.

Even online super discounter Amazon.com practices the reference price shell game to lead you to believe you are getting a deal.  I began to suspect something was up when product reviewers suggested in very direct language that Amazon was outright lying about the suggested retail prices on some of its products.  A few months ago I was in the market for a new coffee maker.  Amazon lists the suggested retail price on the Cuisinart DCC-1200 as $145 dollars and they offer it on sale for $69.95 a savings of 52%.  But what does Cuisinart sell it for? $79.95 and there is no suggested MSRP.  Macy’s has the same item listed for $79.95 with an MSRP of $99.95.  We have to conclude that the Amazon MSRP is simply a fantasy used to bolster the value of the perceived deal.  Amazon is really selling the item at $10 dollars off, a savings of 8.7%.  A pretty thorough Internet search has lead me to believe that this item’s retail price is $79.95 and that even the Macy’s MSRP is made up.  This item is easy to compare because Cuisinart only makes one model of the DCC-1200, but what if there are different models of the same item? Take the Buck 110 folding hunting knife.  The Amazon price is $41.36 with a suggested retail price of $66 dollars.  The implied discount is 38%.  Would that it were true.  LLBean sells the same knife for $34.95 and there is no suggested retail price.  Bass Pro sells the same knife for $44.95 and does not list a MSRP on their site.  Hunting Blades does list the MSRP as $66 dollars while selling the knife for $47.95.  What does Buck sell this knife for?  $45 dollars.  Buck actually sells two versions of this knife.  The knife with brass fasteners is $66 dollars and the one with nickle fasteners is $45 dollars. The image on each site appears to be of the higher-end knife, but none of the sites uses the Buck model number so it is virtually impossible to make direct price comparisons.

Provided that all 4 sites are actually selling the same knife, this exercise illustrates several things:

1) Whether the MSRP is real or not retailers use that number to provide context for the deal you think you are getting.

2) Without accurate model numbers, it is impossible to truly compare prices from store to store

3) It pays,  literally,  to shop around.  Provided we are talking about the same item, LLBean clearly offers the best deal on this knife.

4) It makes sense to go directly to the manufacturer to verify the MSRP.

5) Price is clearly relative.  Clearly all for sites want to sell this knife yet only one site offers substantial savings over the other three.

Amazon’s pre-order price guarantee is a zero-sum game.  The  guaranty only applies to prices in effect on the day an item ships.  The guaranty does not apply to rock-bottom price fluctuations that may have occurred before the item shipped.  Price fluctuations that some buyers will be able to take advantage of, but not you if you pre-ordered the item and expected Amazon to monitor the price for you.  The best thing to do is not participate in the pre-order program and watch prices yourself.   The other thing to do is place the item in your cart then remove it to buy later.  If you do that Amazon will watch the price for you.

I am reminded of the Donna Summer song, “she works hard for the money”.  The fact is that we all do, yet I do believe that we want quality and value not junk as we plop down our hard-earned cash for the products we desire.

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