“List Prices” Have Become Slippery Slope for Retailers, Customers & The Law

Marketing StrategyRemember when price tags had information on them like: "Valued at, compared to, marked down from, or manufacturer's suggested retail price"? In recent years, many retailers have been hauled into court for "false and misrepresentative" advertising -- for comparing the discounted price to list prices that were inflated or non-existent -- misleading the shopper into thinking he is receiving a big value -- when, in fact, he isn't.

In the old days, "list price" was the way to show the relative value of savings a customer might realize on that purchase. But in today's omni-channel realm, with new venues, new competition, new shopping styles, new transparency, ease of accessing product and pricing information, and dynamic pricing, the concept of list price has become blurred and distorted.

Many say retailers should be taken to task for these advertising practices. Others think the law is an anachronism. Yet others believe, in this new world of ongoing sales and specials, consumers should be more realistic in their expectations.

A recent New York Times article: It's Discounted, but Is It a Deal? How List Prices Lost Their Meaning, says the current Code of Federal Regulations states, "To the extent that list or suggested retail prices do not in fact correspond to prices at which a substantial number of sales of the article in question are made, the advertisement of a reduction may mislead the consumer."  

But the rub is that most modern-day retail transactions are built around competitive and dynamic pricing, so it's hard to compare with what the original price was at any given time -- or whether the price that is being quoted ever really existed. Retailers in the arena include Amazon, Wayfair, Walmart, Rakuten, Crate & Barrel, Williams-Sonoma, to a certain extent Macy's, Kohl's, Sears and others who offer frequent doorbusters and never-ending sales; and probably most everybody else in the retail rat race. So the question has become: "What is/was the original price? How many others are charging this price? How much "value" am I getting by paying a sale price?"

In the last few years, most of the retailers above -- and many more -- have been taken to court for "false and misrepresentative" advertising, for "tricking consumers into believing they were purchasing heavily discounted items … based on 'fabricated, arbitrary and false' prices."

The charges included:

* Referring to list prices that never existed;

* Citing prices (for comparison) that virtually no-one is selling at;

* Selling goods at "rack" or "outlet" stores that customers thought were from the main store, when, in fact, the products were exclusively manufactured for sale in the outlet stores.

This is obviously not a trivial matter. Retailers have been ordered to pay some hefty penalties. For example, Overstock.com recently was fined $6.8 million for "false advertising". (That case is presently under appeal). (WIRED: Court Decision Could Change Rules For Online Price Comparisons.

A recent Fortune article asked -- Where have all the shoppers gone? -- and then went on to say: "…Fueled by an unfettered addiction to promotions and discounts… there is a sea change in how people are shopping… There's been a fundamental shift in the way retailers advertise discounts… Could the long American love affair with shopping finally be on the rocks?"

Consumer psychologist Kit Yarrow, author of “Decoding the New Consumer Mind,” is quoted as telling consumers: “We no longer calculate the value (emphasis mine) of a product to us. We look for a bargain first, and use that deal as a way to ensure that we aren’t being duped." Yarrow advised consumers to “Spend less time determining the value of a product based on the consumer deals. Instead, think of what it is, what it’s worth to you, and then buy it or don’t.”  

"In other words, don’t be pressured into buying something just because it’s on sale. Because the reality is, it might not be." (Yahoo.com: "How list prices are duping customers into false deals"). 

Bottom line for your bottom line:

Retail disruption has brought great changes and challenges necessitating new and special ways to do business.

The good news, which we hope might become more common, is that the court has recently dismissed some cases where the complainants couldn't prove that the retailer's pricing was illegal nor that they (the customers) were harmed by it.

Times have changed -- and maybe the law should change, too. We respect businesses playing in the new arena -- new games with new rules, new technologies, tremendous transparency, new competitors and new competitive behavior. Consumers probably will still emerge as the ultimate beneficiaries of these pricing practices, but they have to become more realistic. Retailers besieged by these myriad challenges should also be protected from laws and punishments that no longer address the current reality.

 

 

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Naomi K. Shapiro

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A seasoned market communications specialist, Naomi headed public information for several academic and professional associations and was the founder and CEO of award-winning agency, Creative Brilliance Strategic Marketing Communications. She created and published Brilliant Ideas for Publishers Magazine and authored popular newspaper trade reference, The Brilliant Book of Promotions, Sales Tools & Special Events. Simultaneously, Naomi savored the world as an adventure travel writer that included trekking on glaciers, fishing with saltwater crocodiles and swimming with piranhas. Naomi holds her M.A. from the University of Wisconsin, including participation in a unique industry-science-technical writing program.
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