With the economic climate in 2009, it is likely that consumers will see a growing number of retailers that are going out of business or willing to sell products at clearance prices. Often consumers will be present with various claims such as 50% off for products. These seem like really great deals, but they generally are not that good. Retailers and liquidators use various pricing techniques to generate these percentages to make the discounts look better than they really are.
This article looks to inform consumers about these practices so that they can make sure they are really getting a fair deal on a clearance or liquidation computer system. These techniques are used for just about any electronics item and can be just as useful for any clearance shopping. Before getting into the techniques, its first important to get some basic knowledge on product pricing.
MSRP
The manufacturer's suggested retail price is the amount that the manufacturer thinks the product should sell for by retailers. Most consumers have heard this term used when shopping for an automobile. They also are probably familiar that the MSRP is generally not the actual price that the consumer will pay. The price may end up being higher, but more than likely it is less than MSRP due to competition between retailers, bulk discounts from manufacturers and other means.
Street Price
The street price is the actual amount that a product can be found for at a retailer without any special discounts or savings. As mentioned above, this price is typically below the MSRP. The most common reason for the street price being lower than the MSRP is competition between retailers for the same products. Retailer A prices their product less than retailer B in order to get more sales. Retailer B then generally drops their prices to match. This process continues until a fairly stable price is achieved between retailers.
Clearance or Liquidation Price
Retailers that are trying to get rid of old products from the shelves will generally sell a product at a discounted or clearance price. Similarly, a store that is going out of business will generally sell a product at a discounted or liquidation price. These terms are pretty much interchangeable as they just mean that the product is being priced to get it out of inventory. This could be because they want the space for newer products or need to pay off creditors when they go out of business.
Real vs. Advertised Discount Rates
Now retailers that are doing clearance or liquidation sales will generally have a percentage discount listed next to their clearance or liquidation price. These big numbers are used to entice consumers into thinking they are saving a large amount of money by buying the product from them instead of another retailer. This is where the deceptive practices come into play.
Most discount rates that are listed by the retailers will be based on the difference between the MSRP amount and their clearance price. Because the MSRP is generally a higher price than the street price that the product can be purchased at, the discount rates are being inflated to make the consumer think they are getting a better deal. Let's take a hypothetical example that I have based upon some real world liquidation prices I have seen.
A computer retailer is going out of business and has been forced to go into liquidation. A third party comes in to sell all the inventory to pay off creditors. It is in their best interest to get the most money they can to pay off the debts. A certain laptop is in their inventory that they are looking to sell. It was originally released 9 months prior and had an MSRP of $1000. At that time, the street price through retailers was around $800. Since then, the manufacturer has discontinued that model and replaced it with a new one. The liquidator decides to sell the laptop for $600. To entice buyers, they list it as being 40% off as it is that much less than the original MSRP. Of course, the real discount would be just 25% since the product could have been purchased for $800 when it was released from this same retailer.
Now, this looks like consumers are still getting a discount of 25%, right? Wrong. The product has been discontinued. Other retailers are now clearing out their excess inventory with clearance prices below the original release street price. What price are they selling it at? The exact same price as the liquidator's clearance price of $600. This means that in this example, there is no real world savings from buying from the liquidation sale.
How To Avoid Such Scams
Liquidation and clearance sales rely on the impulse buying of consumers. They see signs with large discount percentages and are tricked into thinking they are getting a good deal. The retailers are relying on the lack of information by consumers of current real world pricing. This is the part that consumers need to address before they walk into such a sale.
There are two ways to really have information when dealing with such sales: research ahead of time and tag team real time shopping. Researching ahead of time is generally the easier of the two methods. It allows consumers to think of products they would be willing to purchase ahead of time. Once they have a list of items, they can research the actual prices of the products in question from other retailers. When they are shopping in the store, they can compare their researched prices with the clearance prices and see if they are getting a deal. If they aren't, they can simply walk away. They also will be less tempted by impulse buying.
Tag team shopping is a bit more difficult. It requires some method for looking up pricing real time. This can either be with another individual on a cell phone at another retailer or at a computer or with some form of internet access within the store. Both methods allow for a clearance product to be checked out against other sources to find out if the price really is discounted. It involves a lot more effort but it produces much more accurate results. It can also be more useful to the individual who is shopping for deals but isn't quite as sure what products they might want.
