All year round, we see this most recognized four-letter word, that conveys a very powerful message. No need for any further explanation yet all of us know that it certainly means, a more affordable price goods to buy, more value for our money, big savings.
Being in the retail industry myself, I would like to emphasize the many facets, benefits of what this word means for both retailers and consumers.
Most customers are appealed towards the word "SALE" being displayed alongside merchandise/goods being sold, and have you observed that this is most often being displayed store-wide during special occasions such as Graduation Day, Summer season, Back to school, Halloween, Christmas and New Year are the major "Sale season" and there are the "Payday Sale", "End-of-Season Sale", "Holiday Sale", "Father's Day Sale", "Mother's Day Sale", "Grandparents Day Sale", "Anniversary Sale" to name a few.
There are also the departmental Sale : "Toy Sale", "Furniture Sale", "Lingerie Sale", "Mens Wear Sale", "Appliance Sale" and many other category or brand sale.
As part of retail, the reason "Sale" is being implemented in-store is to draw the buying crowd, especially during payday, another reason is for retailers to be able to deplete their stock inventories to free up the retail shelves and turn them into cash to have more cash-flow to purchase new items to be sold in their stores. This is the avenue for most retailers, department store, business owners to make customers feel being active part of the exchange of goods for their money.Stores are more likely to place sale signs on items with higher unit volumes. Unit volumes vary across products.
Store sale sign and price strategies are entirely endogenous
in the model, as is the impact of sale signs on demand. Demand increases for products with sale signs
because customers believe these products are less likely to be available in the
future.
As for profit margins : stores are more likely to place sale
signs on items with higher profit margins.
The shift in demand upon use of a sale sign can lead to higher prices
and also higher unit volumes.
The effectiveness of sale signs by arguing that they inform customers about which products have relatively low prices, thus helping customers decide whether to purchase now, visit another store or perhaps return to the same store in the future.
Sale signs makes the consumers aware of price-markdown, big discounts that may translate to perceived big saving also increase demand for products.
The apparent effectiveness of this simple strategy is surprising; sale
signs are inexpensive to produce.
On the part of the consumers, they most often have limited or incomplete idea of the true value of the products being put on sale, they may not have any hint if these are over-stocks, for depletion or are priced with higher margins. The main point why customers are drawn towards "Sale" is their notion that they can find good deals of what they have wanted to buy in the past but limited due to the regular pricing, or they have the perceived savings to be made, this also hasten their decision-making in the urgency to immediately purchase even if the product does not immediately pose a need for the consumer.
In summary, its a win-win for the customers, if the retailers put on sale their premium and regular items that are not at all over-stocked or slow-selling, if its being offered all across product stock keeping units(SKU) and not just on the selected items that they deemed to be old stocks or non moving items. For the consumers, they also would be giving the much needed help by buying the products put on sale be it discounted or full-markdown priced. Since this will entail the business to have more cash-flow to buy new merchandise to put on display for their future shopping pleasure.
