Recession Price? How to negotiate with retailers.
Tuesday, June 9th, 2009
Retail prices are a lot more negotiable than you might think. But before you go out and try to play hardball to get a discount, learn the rules of the game.
This is a very long read but well worth it By Katherine Reynolds Lewis at MSN
You see an item you want in your local big-box store. The price seems too high. You ask for a discount — and you get it!
This scenario may seem far-fetched, but expert negotiators say it occurs every day in retail outlets across the U.S. With consumers restricting their spending, store owners need every sale they can close, even if it means accepting a smaller profit.
“Retailers, particularly a number of the high-end retailers, are in real trouble given the current recession, and they’re willing to bargain,” said Joel C. Huber, a marketing professor at Duke University’s Fuqua School of Business.
That’s not to say it’s easy to win unadvertised discounts. The art of the haggle is an intricate dance, and you must know the steps before you venture onto the dance floor.
And you have to be willing to ask.
“The thing people don’t understand about the retail industry, especially brick-and-mortar stores, is that prices aren’t fixed,” said Albert Ko, a co-founder of bargain-hunting site CheapCheapCheap.com. “With the economy, it’s all about the numbers and getting goods sold. . . . They’re willing to listen and work with you.”
Really, you have to ask
Americans are notoriously uncomfortable negotiating bargains, said Julie Parrish, the chief executive of Hot Coupon World.
“My dad’s from the Middle East, and they haggle for everything. You grow up knowing how to ask,” Parrish said. “People are scared. They view it as a confrontation, and it’s not. You’re simply asking. There is so much leverage in pricing other than the price of a gallon of gas.”
You may think you can’t negotiate with a mainstream retailer with fixed prices. But even discounters such as Kmart give their stores the leeway to cut a deal if you give them a good reason. That can be as simple as pointing out a scratch or flaw, or bringing in a flier advertising a lower price at a competitor.
Lila Delilah, the founder of Madison Avenue Spy, has found that boutiques offer discounts upon a hint. She was looking at a children’s coat that was 30% off and remarked that she saw it for 50% off the previous season. The owner immediately offered an additional break.
“I have a friend that’s been walking into every boutique she goes into and asking for the ‘recession price.’ Amazingly, she’s getting 25% to 30% off just by asking for it,” Delilah said.
When should you ask?
When you’re buying a lot. At Costco, Parrish saw a man taking dozens of packages of baby back ribs out of the display to put in his cart. The manager stopped him and asked how many he wanted. The man ended up buying six cases of ribs at a 10% discount.
Indeed, volume discounts are a key way to save in this economy. If a department manager can move a lot of inventory, he’ll be flexible on price.
“They’re happy to do it because they get bonuses tied to volume by department,” Parrish said.
When the product is on its way out. Stores also like to get rid of all units of a clearance item so the display can be used for another product. Using this knowledge at Walgreen’s, Parrish’s business partner got about 50 Burt’s Bees lip gloss tubes for 50 cents each, down from the clearance price of $1.59 and regular price of $3.99.
Consider the meat department of your local grocery store just before closing time. The manager might prefer to sell the entire display of ground beef and go home, rather than spend 45 minutes wrapping and storing the meat. If you can freeze the beef, either as patties or cooked taco meat, you can end up saving more than $1 per pound.
When you’re dropping a small fortune. At high-end department stores, if you spend more than $15,000 or $20,000 in a single visit, you can usually get 20% off the entire purchase, Delilah said.
“Stores that sell Christian Louboutin shoes, you can say, ‘These are very expensive. Is there any way you could give me something off?’” Delilah said. “In this economy, everybody’s looking to crack a deal. If you’re ’spending bank,’ there’s going to be more flexibility.”
When you pay cash. Because merchants can’t legally charge extra for credit card payments, the cost of the associated fees is built into every transaction. But they can offer a discount for cash. Ask.
First, do your homework
The seller is unlikely to accept a deal that leaves no profit. So before you enter the store, check out comparable items online or in the store’s competitors. That will give you the range of prices.
Make sure you understand which items have a larger profit margin and which have a shorter shelf life, such as perishables, seasonal clothes and consumer electronics that become outdated. You’ll have better luck negotiating if the manager wants to clear the inventory out of the store, said Jim Crawford, the executive director of the Global Retail Executive Council.
At a Best Buy recently, Ko’s father wanted to buy a 42-inch LCD television. When they first spoke to the manager, he said he couldn’t give a discount. Ko then said he had seen the TV for less on the Internet but wanted to buy it in person and suggested a package deal.
They ended up getting $200 off the television, bringing it under the Internet price, by purchasing a warranty and accessories, both big-margin items.
Jewelry has one of the highest markups of any product category, said Kit Yarrow, a psychology and marketing professor at Golden Gate University.
“Even at mall jewelry stores you can negotiate,” Yarrow said. “I don’t think I’ve ever in my life purchased jewelry without getting a discount.”
Stick to your guns, but be flexible when you can
Before you get carried away with the power of haggling, an important note: You must keep your key criteria in mind when you’re negotiating and be willing to walk away if they’re not met.
The most important parameter is your top price. If you are bargaining and it becomes clear the seller can’t do better than your top price, thank him for his time and leave.
Also, be willing to give on features or criteria that don’t really matter to you.
For instance, Parrish wanted a new minivan that had sliding doors but didn’t care about the color or model. She walked into the dealer saying, “These are the must-have features, and this is the price I want to pay.”
Even if a retailer won’t cut the price, it might throw in some extras for free. If you’re making a major purchase, ask for complimentary delivery or installation. For clothes, suggest free alterations or cleaning and pressing.
Parrish recently walked into a Lowe’s store looking for a front-loading washer-dryer set. She didn’t care about the brand and noticed a Maytag floor model with a scratch on the dryer and only one display pedestal, for the washer. She asked to speak to the manager and negotiated a discount based on the scratch and it being a display model. Then she asked what they were going to do with the pedestal.
“Is somebody going to buy that sitting by itself?” she asked, mentioning that she’s a mom with three kids and couldn’t bring the set home in her vehicle. The manager threw in the pedestal and delivery as well. The entire transaction could’ve cost $2,100 but ended up being $1,100.
Haggling rules to live by
Make it personal. Try walking into a store with the best attitude possible. Be friendly, respectful and interested in developing a relationship with the sales staff. (See “Know thy enemy: Understanding the salesperson’s tactics.”)
“Introduce yourself with your name and a handshake so you take away the anonymity,” Parrish said. “Now I’m working with Bob the sales guy, and he’s working with Julie customer. You make it personal.”
Talk to the manager. As sugary sweet as you can be to the frontline sales clerk, you’ll never get a worthwhile discount. He simply doesn’t have the authority to offer one.
You have to speak with the manager, the person who has the power to negotiate. But when you ask, be nice, and offer to help that clerk who’s now your first-name buddy.
“You say, ‘John, I’m looking at this television,’ and I have a question about the pricing,” Ko said. After a friendly conversation, say: “You’ve been very good to me. I’d like to help you. Where’s your manager? Let me throw in a good word for you.”
Keep your word. Your career as a negotiator will be short-lived unless you follow the haggling protocols. If you tell a frontline clerk you’re going to put a good word in with her manager, do so.
“Always follow through; don’t say it and not do it. Execute on it and respectfully do what you say,” Ko said.
Don’t make them regret it. The last thing the retailer wants is to have 50 of your friends walk in and ask for the same deal. Stores don’t want it known that they will cut special deals. Few were even willing to talk for this story.
In an e-mail, Lowe’s spokeswoman Abby Buford said, “Managers do have the discretion to adjust prices if necessary to be competitive in the market.”
Costco generally offers volume discounts only when customers buy a product by the truckload, Chief Financial Officer Richard Galanti said in an interview.
“We sell at incredibly low prices every day,” Galanti said. “When someone wants a discount beyond that, it’s going to be at the discretion of the department manager. We don’t encourage or discourage it.”
8 phrases that win discounts
* Use “if . . . then” statements. For instance: “If I buy two of these Tiffany necklaces, then can you give me 25% off?” Or: “If I buy the entire rack of ground beef, then what’s the best price you can give me?”
* Begin by saying what you do like about the store, service or product. It establishes you as a loyal customer and a decent human being.
* To begin negotiations, say, “I’d like to pay X” or “My budget is Y.”
* Give them a reason to say yes, whether it’s a scratch on an appliance or a model from last year.
* When the seller turns down your offer, ask, “Is there a price you’d accept?”
* “I want to stay a loyal customer. But I’ll tell you the truth — it is tough to pay the bills.”
* “I’m not happy with the price I’m paying for this service.”
* “What’s the ‘recession price’ for this coat?”
