The Power of a Dollar Figure

People economize to get as much value as possible out of the resources they have. We all change our behavior to “take advantage” of price changes on items we want. Retailers recognize this long-standing accommodation and have come prepared.  And so has Ellen Rupel Shell, an author who has studied the discount dollar and the tactics retailers take to sell their product. In her book Cheap: The High Cost of Discount Culture, Shell says that cheapness is ruining everything – from decent shoes to buying a mattress.  Shell asks “What are we really buying when we insist on getting stuff as cheaply as possible?” and argues that the decline of our economy, our food sources, our environment and our wages are all based on buying on the cheap.

Consider fast fashion, for example.  In the past few years, the demand has been high for modestly-priced wear and, to make that cheap fashion affordable, a manufacturer might skimp on the details.  How many ladies complain that their buys from certain stores fall apart in the wash?  Look at the way customer service has declined; how often do you have to play the “May-I-Help-You-Riff” before a sales associate will come help you (without putting on airs of annoyance)?  Still, consumers continue to go back to the source because it’s “affordable” and convenient.

BoingBoing elaborates in their article about Shell:

[Shell]went to a shoe “mini-outlet” to buy a pair of boots for a New Year’s party, and asked for “something special.” The clerk showed her a pair of “buttery” leather Italian boots, but they were too expensive so she bought cheap knockoff boots from China that cost one-quarter as much as the Italian boots. After wearing the boots just once, she decided that they were “clunky and so uncomfortable” that she threw them into the back of the closet with the “heap of other unwearable ‘good deals’ in bad colors or unflattering shapes: a bargain hunter’s pile of shame.”

… Products now come in two categories: stratospherically priced luxury objects or slipshod discount crap, with few mid-priced, well-crafted objects available, because craftsmanship can’t compete in the mass market.

Cheap takes a long hard look at outlet malls as one of the biggest sources of discount culture.  In an article on AlterNet, Shell notes that “outlet” is synonymous with “value”, and the idea of outlet malls makes consumers think they’re getting a sweet deal.  What consumers don’t necessarily realize is, though outlet malls advertise “first-quality, brand-name products”, what they’re selling is actually made specifically to be “outlet” merchandise, which means lower quality.

Consider Banana Republic – a popular retailer with a popular outlet chain.  The BR outlet may offer a number of pieces that just didn’t sell last winter – and there, consumers are buying that first-quality, brand-name merchandise.  But what about the rest of the stock?  A good portion of the items there are made specifically for the outlet store, and that means that, where a regular Banana Republic men’s tee sports a high thread count and great design, an outlet men’s tee isn’t nearly as soft, doesn’t hold its shape as well, pills, and rolls up or loses stitches at the bottom hem.

[In fact, on a personal level, Mister came to me the other day with just these discrepancies in manufacturing and said that the "cheaper" outlet tee didn't have the same overall fit. It was easy to tell which tee was well-made and which tee was "outlet quality". At that point you have to wonder, "Did I get a good deal after all?"]

The beauty of outlet malls, at least to retailers, is that people believe they’re getting a better value for the price so they’ll spend more. And what Shell calls “high/low-retailing” is the bait, as she explains in the Alternet article:

[Retailers] lure customers with drastic reductions off the manufacturer’s suggested retail prices, but the manufacturer’s suggested price is not even intended to reflect the real price. More accurately[...] it is a mythical price, a reference price with which to manipulate customers’ willingness to buy.

… A designer label can make us believe that a flimsy T-shirt is worth the $150 manufacturer’s suggested price (MSP) or at least close enough to it to make it a steal at $25.

How many times have you scored a fantastic find on a sale rack and, while walking your purchase up to the register, thought, “This is WAY on sale!  I’m getting a really great deal here!”?  Before buying next time, ask yourself: if the original MSP is $100 and you’re getting it for $29.99, is what you’re buying REALLY worth $100?  It should come as no big shock that, in those cases, the item isn’t worth $100, it’s worth $29.99.  Often, those sorts of finds come to the store with the $29.99 price tag already affixed, and there are no laws that state a retailer must be up-front about the real price of an item.   Shell states, “As many of us suspect, sale prices are often full prices dressed up in discount drag.”

True, we are more persuaded to buy something where the demonstrated value of a product is high (based on the product’s MSP), but the price is low.  We want the best bang for our buck.  That value is based on supply and demand – not necessarily the cost of manufacturing the product (though generally those factors are taken into account).  Outlet malls and the discount culture have grown, based largely on the fact that there are consumers out there fueling demand for those price points with little or no knowledge about the true practices in retail pricing.  Becoming informed consumers is the first step away from what Shell calls “the Bargain Hunter’s pile of shame” and the first step towards saving money on worthwhile goods in the long run.

Extra Credit Reading: