Everything Everywhere Should Cost the Same

Every once in a while I talk to customers who seem to be confused by the fact that the store at which I work does not have items that are identically priced to other locations in the greater metropolitan area. Along the same lines, I've observed people complaining on message boards about how their local store never seems to put anything on clearance but other locations much farther away have much better deals. It absolutely boggles my mind that this is such a source of confusion for people. It's like picking apples from an orchard and then driving ten miles in a random direction and then complaining that there isn't an identical grove of trees with exactly the same kind of fruit.

I'll let you in on a little secret, kids. Not every store is exactly the same.

Or, to elaborate in much greater detail: There are two different kinds of markdowns, at least for the purposes of this discussion. The home office, which makes a vast majority of the pricing decisions for the stores, sends down direction to the store computers. They're basically instructions like, "Put this assortment of $4.97 toy cars on clearance for $3.00" or "bump up the price of these action figures from $8.47 to $8.97." The department managers have to go find the product in question and perform the necessary labor (execute the price change by telling the handheld scanner how many items were found, print new shelf tags, move deleted merchandise into a clearance section, etc.) but there's almost no decision-making involved. The new selling prices are already decided in advance, and clearance items usually conform to a fairly rigid set of existing price points (almost without exception, merchandise at my store will fall into price brackets in odd-numbered multiples; i.e., $17, $15, $13, $11, $9, until you hit the lower dollar amounts at which point we nickel-and-dime you to death: $4.00, $3.50, $3.00, $2.50, etc.)

Or, to provide a practical application, the aforementioned action figures normally selling for $8.97 will most assuredly go on clearance for $7.00 when the manufacturer stops producing them, or when the store decides to stop carrying them. You can pretty much count on this.

Then there are store-initiated markdowns, which are a completely different animal. You see, when the home office sends down the price changes, it's the company that's paying for it. Retail math is kind of weird because money can just disappear. Suddenly, that case of 12 action figures used to have a retail value of $107.64, but suddenly its value has diminished to $84.00. It's the exact same case of toys, but now they're selling for less than they used to. Well, there are situations where the stores can decide to bring the prices down even further, but it's on their dime. Let's say there's a store that doesn't just have a single shipping case of 12 of these slow-moving action figures, but they have ten cases still in the stockroom. They recognize that they will be sitting on this merchandise forever unless it's priced to move, so they mark the toys down to five bucks a pop. Of course, that store has also just spent an extra $240, and it's coming right out of their own bottom line. Is it worth it? Depends. Sometimes it's either take the loss and get rid of the product while it's still marginally relevant, or sit on it forever as it continues to become shopworn, packages are damaged, pieces are lost, and the stuff makes zero revenue for the store.

What's fun about being a department manager is that you get to spend money that isn't yours. If the store manager provides you with $500 of markdown dollars, then it's up to you how you want to distribute it. When I managed the Furniture department, that sometimes meant I only marked down five pieces of furniture at a hundred bucks a pop, or maybe ten units got marked down fifty dollars. Five hundred bucks sounds like a lot of money to play with, but in truth, it's really not. Even marking down a toy by one dollar can cost a lot if you still have a couple hundred of them in your inventory. Frankly, I would rather take a bigger hit on a handful of really slowly-moving items than distribute markdown dollars so evenly that everything in my clearance aisle is reduced in price by only fifty cents or a dollar. Customers aren't even going to notice that, honestly.

You know what I still can't figure out, though? People who come into the store at the end of the summer season and wonder why we're out of pools and can't order any more of them. And, in the same breath, want to know why our remaining water toys aren't on clearance yet. (Am I the only one seeing a contradiction here?)