Mendoza School of Business

Economy creates a buyer’s market

Published: October 28, 2008 / Author: Heidi Prescott



Looking for a good deal? Stores all around us are slashing prices and sweetening incentives to entice consumers to spend during the economic decline. Retailers are advertising fantastic savings, super sales and huge blowouts. They are offering grand prizes and no-interest financing, and making sure shoppers are clear on their pricing.

No matter the offer, when the price is still not, low enough, shoppers in the current buyer s market are often able to negotiate a better offer from the furniture store to the car dealer. The deal may be a lower price, a longer warranty or another item tossed into the mix for free.
John Christianson, owner of Christianson’s Furniture on McKinley Highway in Mishawaka, said people should look around for the best prices and then make an offer in case the store might have some leeway.

“Business is slow, naturally, as it is everywhere and during those times retailers, myself included, are willing to take a little less for their product,” Christianson said.

The store will take a little deeper discount on clearance items, he said, as well as on furnishings that normally are not marked down.

“We’d come down a little bit on those. It depends on the item and if we’ve had it, a while,” he said. Negotiating a lower price with a consumer drives traffic and sales for the store. “We can move something off the floor, buy something fresh and new and possibly hit a home run.”
And the consumer wins, he said, by taking home a product of better quality than they otherwise might have been able to afford.

“People should always come and look. You never know when you’ll find a Mercedes at a Chevrolet price,” he said.

Consumer in charge

The consumer clearly has the upper hand in today’s buyer’s market a time when supply exceeds demand and stores are more likely to discount and allow negotiation and bargaining to more quickly move inventory off the floor.

“Most of us can put off buying a new sofa, a newcar, or a new lawn mower. But there is always some margin in those products that allows retailers to think about negotiating,” said Michael Etzel, professor of marketing, Mendoza College of Business, at the University of Notre Dame. “I think we’re much more in a buyer’s market than we were a year ago. And it could get better or it could get worse.”

In their research, Etzel and colleagues have found that consumers generally feel that retail prices are higher than they should be. Coupled with the current climate of the shopper feeling enabled to ask more from stores, consumers now expect price reductions and bonus addons.
Retailers, however, have reason to be wary of lowering prices across the board for extended periods of time, Etzel said. Consumers are conditioned to discounts, potentially making it difficult to return to regular pricing. Not only can lower prices signal that, the store can survive by offering the lower amount, but they also could have a diminishing effect on the perception of the product value the store offers.

“We use price to judge quality,” Etzel said. “If the price comes down and the store stays in business, consumers might think the product is of lower quality or that the store was charging too much to begin with.”

Bargains galore

Terri DeWulf, who says she has always been a price conscious shopper, has noticed more markdowns at area stores in the past year as the economy has soured.

“There seem to be more sales or deeper discounts just to get people in the door,” said DeWulf, an Argos mother of six, with a seventh child on the way. “I guess I am one who is always looking for bargains and sales. But I have noticed that, what used to be the cheaper items in the stores have even gone up in price considerably.”

Her husband is much better with asking stores to be more forgiving on a price when he finds something has a dent, scratch or small part missing. Or if it is a floor model they are considering, he asks for a deeper discount and “always gets a better deal just for asking.”
“I think this works especially well if you go into these stores and know what you are talking about,” she said.

Without as much “fun money” to spend on dining out or other luxuries, the DeWulfs have instituted a spending rule as they endure, as most of us are, tough economic times. “If we can’t pay cash, we don’t buy. Plain and simple.”

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Topics: Mendoza