The big screen television is, indeed, very big. And the brightly colored sign plastered on the corner is every bit as prominent.
“Thirty percent off!” the placard boasts. Before you can say “Pass the remote,” the cornerstone of your home theater is being loaded into the back of your car.
Two weeks later, you notice the sale sign where you bought the TV is gone but the advertised price remains the same. Curiosity turns to anger a month later when the same television is advertised for $100 less than the “sale” price you so shrewdly landed.
Over the past several years, major retailers have been fined for running what courts have determined are fake sales. In 2011, retail chain Michael’s was slapped with nearly $2 million in fines for leading customers to believe they were receiving significant discounts when they were actually paying regular store prices.
In ruling against Kohl’s department store in 2013, a federal court in California determined consumers may be harmed financially if purchases are based on misleading sales prices. In that case, a consumer argued he would never have bought luggage and clothing — advertised as marked down as much as 50 percent — if he’d known he was really paying full price.
But courts and consumer regulators aren't the only recourse against misleading advertising. Consumers themselves can determine if a sale is genuine by simply slowing down the urge to buy and doing a little homework before deciding to buy.
Misleading sales can be touted in many ways. For instance, it’s not uncommon for retailers to push deals based on a comparison with overblown “suggested” prices.
“Some retailers have been accused of showing inflated retail prices to make their deals look better,” said Phong Vu, CEO of DealScience.com, a consumer shopping site. “More often than not, they are showing the actual manufacturer’s suggested retail price — but no one actually sells that product at that number.”
Some stores are also very adept at getting around consumer guidelines that define a “sale.” For instance, an item must remain at a certain price point before any discount can be a legitimate sale. But retailers can get around that by boosting the price of an item for the required time, then bringing the price back down to the intended amount.
“It’s known as pulse promotion,” said Mark Ellwood, author of “Bargain Fever: How to Shop in a Discounted World.” “A T-shirt might be tagged $25 for the first two weeks of the month, and the store might sell one to an uninformed buyer. Then for the final two weeks, it’s half price at $12.50, and 100 or more are sold.”
“Liquidation” sales can pose other landmines. Although consumers may assume that soon-to-be defunct stores are eager to dump merchandise at deep discounts, some retailers jack up prices at the outset of liquidation events, only to trim them later on. That leaves early bird shoppers paying top dollar.
The National Retail Federation had no immediate comment on the ethics of sales advertising.
Run the numbers
Consumers can do some legwork to ensure a sale is really a sale.
Start by leveraging the Internet to compare the price of the item with those of other stores and retailers. That can offer a foothold on what’s a going price and what’s more likely a bargain. Vu said Amazon.com is a good place to comparison shop.
“They are almost always competitive,” he said. “When you see a product well below Amazon price, it’s usually a pretty good deal.”
A calculator can help determine the actual discount of a sale price coupled with an “extra discount.” For instance, a food processor at 25 percent off plus an additional 20 percent discount for extra incentive may appear to be a 45 percent discount. But that's only if the extra 20 percent off applies to the discounted price tag, not the original price.
Pay attention to what consumer psychologist Bruce Sanders, author of “Sell Well: What Really Moves Your Shoppers,” refers to as the effects of price “anchors.” These can alter buyer psychology to make less-appealing items more attractive.
For instance, a bread maker on sale for $275 at Williams-Sonoma seemed pricey until a more expensive alternative appears. “After Williams-Sonoma added a $425 bread making machine to its merchandise line, sales of the $275 unit doubled,” said Sanders. “At the time, Williams-Sonoma had more than 200 stores, as I recall.”
A store’s low-price guarantee can be a good indicator it's offering you a genuine deal. But watch the specifics of the offer, such as “twice the difference in price” promises. “To have this guarantee honored, you would need to buy a second copy of the product and then travel back to the first retailer for the money and then bring the second copy of the item back to the other store, hoping they have a liberal return policy,” said Sanders.
Be sure to follow through on any sale that involves a mail-in rebate. Consumers typically don't file for rebates — estimates have found that as many as 60 percent of rebates go unused, according to the website ConsumerWorld.org. That only waters down the savings of any sale — to the benefit of retailers.
Lastly, consider all costs associated with buying an item, not just the sale tag price. For instance, an online price may beat the base price at the store. But when sales tax and shipping are added to the online deal, the difference shrinks or goes away.
Many sales exploit the “too good to pass up” mentality that can lead to snap, ill-considered buying decisions.
“The timing of a sales event is designed to create a sense of urgency,” said Mark Donnolo, founder of SalesGlobe, a sales consulting company. “A buyer needs to ask himself whether the timing is motivating him in a way that he doesn’t need to be motivated.”
Rather than a knee-jerk reaction to an appealing sales price, Donnolo suggests consumers step back for a moment and consider whether the item addresses some sort of need than just finding a good price.
“For instance, if you’re shopping for a light bulb, of course you’re going to be looking for a competitive price,” he said. “But consider how inexpensive the light bulb will be to operate. Will you have to install one every year or will another last five years? It has to fit the value proposition that the consumer is looking for.”
Taking time to carefully consider if a purchase really makes sense can help consumers resist the blinding appeal of any sales price, genuine or otherwise. And, if it happens that the consumer need is there and the deal adds up financially, all the better: “Buying power can be very strong,” said Donnolo. “You can really use it to your advantage.”
Jeff Wuorio lives in southern Maine, where he covers personal finance and entrepreneurship. He may be reached at firstname.lastname@example.org, and his website is at jeffwuorio.com.