How Retailers Concoct 'Bargains' for the Holidays Suzanne Kapner - WSJ.com
go to original December 1, 2013

With the holidays approaching, we explain how retail discounts generally aren't discounts at all — they are priced into it from the beginning. Suzanne Kapner reports on the News Hub.

When shoppers head out in search of bargains this holiday season, they won't just be going to the mall, they'll be witnessing retail theater.

Stores will be pulling out the stops on deep discounts aimed at drawing customers into stores. But retail-industry veterans acknowledge that, in many cases, those bargains will be a carefully engineered illusion.

The common assumption is that retailers stock up on goods and then mark down the ones that don't sell, taking a hit to their profits. But that isn't typically how it plays out. Instead, big retailers work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want.

The red cardigan sweater with the ruffled neck on sale for more than 40% off at $39.99 was never meant to sell at its $68 starting price. It was designed with the discount built in.

Buyers don't seem to mind. What they are after, especially in such a lackluster economy, is the feeling they got a deal.

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