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The most popular four letter word PDF Print E-mail
Written by Alixe MacRae   

ImageIt's not often our industry makes the news. Recently, it did. But not for the reasons most of those of us working in the industry would like to see. A Montreal-based consumer rights group, Option consommateurs, filed a complaint with the Competition Bureau severely criticizing eight national and regional retailers and accused them of misleading advertising. The findings are generally fair and reasonable - at first glance.

The retailer is always looking for a profit edge and with the abysmal profit margins most store owners are coping with these days, it's not all that surprising. He or she also has to remember the consumer's favourite four letter word: sale.

I remember when I was just a management trainee at Sears Canada (almost a million years ago) that part of the job was attending the regular division manager meeting. At one of these, the manager in charge of major appliances was discussing an upcoming full page newspaper ad featuring a washer and dryer pair. The store manager asked how many pairs had been purchased for the store and being told: three. The salesperson who actually sold the advertised item would be in serious trouble.

I also remember a time when an expensive power tool was sold at regular price through the catalogue - a definite departure from the norm at the time. Someone at the meeting asked, tongue in cheek, the buyer whether his mother had ordered one.

Things have changed. Today, most furniture retailers, large or small, track purchases by SKU (stock keeping unit) number to ensure they are off sale more than 50% of the time, which is the usual legal requirement. This, in turn, led to the most popular items being offered in six different colours - each with its own SKU. This ensured the retailer was free to advertise identical items more frequently than one-colour rule allows.

The Bay - where I was also employed in a senior furniture role - is rigorous in this regard. Buyers must sign a document every quarter swearing that the over 50% regular price rule is being followed. This includes Seniors Day (where the price may be higher than the previous weekend) and all other miscellaneous events. While this may sound draconian; who other than the buyer really knows the potential exposure when it comes to pricing and related matters?

Both Sears Canada and the Bay were accused of misleading advertising in the Options consommateurs report, as were six others including the Brick, Leon's , Brault & Martineau, Sleep Country Canada, Mattress Mart and Germain Larivière.

Believe or not, I'm not blaming the retailer. Customers have always wanted a deal and are more than willing to believe they have outsmarted the retailer. There is a retailer in Toronto who knows their customers come in to haggle. This merchant sets his prices accordingly and then allows the sales consultants to discount the price to a pre-determined level - all as part of a process designed to give the customer the shopping experience she expects.

I recently had to advise a client in regards to the best price for a national brand bedroom set. I made a few calls and got the best price from a retailer that doesn't hold sales - he follows the everyday low price (EDLP) model. This merchant isn't well known. No advertising, no fancy stores and no direct mail postcards inserted in the Globe & Mail. This outlet will likely never grow, but will remain profitable with a loyal customer following.

Mattresses were a big part of the Option consommateurs' 317-page report. It listed dozens of examples of how mattresses were priced and promoted. But what they don't understand - making them no different from most members of the general public - is mattresses are a completely different issue.

Other consumer groups haven't looked at mattresses because of the product's complexity.  Simply put, mattresses are a sandwich and each can be configured with or without the product's version of mayo, tomatoes, lettuce, bacon or guacamole. Try to compare, if you dare.

Eaton's tried everyday low prices and went bankrupt. Others have attempted the switch with equally disastrous results. Until the consumer is cost savvy, the retailer will be forced to respond to what works.

Dumb consumers create equally dumb advertising and that is what's really wrong with this issue and why the Competition Bureau may find it has no choice but to investigate the allegations contained in the Option consommateurs' report.

(Click here to read HGO's report on Option comsommateurs complaint.)

A regular contributor to Home Goods Online, Alixe MacRae is one of this country's best known merchandisers, having held senior positions at a variety of well-known Canadian retailers including Stoney Creek Furniture, Sears Canada and The Bay. She recently started her own business Concierge Relocation (www.conciergerelocation.com). Her company specializes in move management, especially for those dramatically downsizing seniors and their overwhelmed children.

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