Inflation or one hell of a sell

[southpennrailroad]

I walked into a Lowe's store today to pick up some items for a job I was doing. I walked past the tools where a set of open end wrenches were being re priced. I did a dead stop to watch this and saw the price being removed as marked @ $24.00. The new sticky tag was marked $79.00. WT@#*^$#@. I was glad I wasn't buying them. I said are you sure??? Yep she said. Acted like this was normal and she was numb to this doing it all the time.

[mikeschn]

Inflation, the way it was calculated in 1980, is currently running about 11 or 12%. Some stuff more, some stuff less. Steel, unfortunately, more. I can't find a more current chart, but you get the idea.



I found the same to be true for aluminum. I built a teardrop and skinned it in aluminum in 2003, for about $30 a sheet. Now the same sheet is somewhere in the ballpark of $100. I can't afford to skin my O.W.W. with aluminum. It would cost me about $1400.

As for your experience in Lowes, I can only imagine that they've been holding off on raising the prices way too long. And now they are raising the prices based on the cost to replace their inventory.

If prices keep going up like this, no one will be able to afford anything

[southpennrailroad]

Got that right Mike!

[Mojave Bob]

Look at it backwards. Suppose this is a set of wrenches with a regular retail price of $79. That would probably equate to a regular cost to the store of about $47.40, based on them buying normal quantities for day-to-day sales. However, the company decides to do a big promotion of these particular wrenches, and negotiates a special deal with the supplier. They will get an additional 30% off, plus a 30% advertising credit, based on the volume they agree to purchase. So, the cost of $47.40, less 30%, less 30%, puts the landed cost at $23.33. The store advertises it for $24, makes 67 cents on the sale, and gets the advertising paid for by the supplier. When the special deal is over, prices return to the normal 40% margin for hand tools, and the price goes back up to $79. Hand tools have a fairly high profit margin, such as 40%. Power tools, electronics and larger-ticket items have much lower margins, so the price swings usually aren't as dramatic. When I used to work in retail management, we did this sort of thing all the time.

[48Rob]

Look at it backwards. Suppose this is a set of wrenches with a regular retail price of $79. That would probably equate to a regular cost to the store of about $47.40, based on them buying normal quantities for day-to-day sales. However, the company decides to do a big promotion of these particular wrenches, and negotiates a special deal with the supplier. They will get an additional 30% off, plus a 30% advertising credit, based on the volume they agree to purchase. So, the cost of $47.40, less 30%, less 30%, puts the landed cost at $23.33. The store advertises it for $24, makes 67 cents on the sale, and gets the advertising paid for by the supplier. When the special deal is over, prices return to the normal 40% margin for hand tools, and the price goes back up to $79. Hand tools have a fairly high profit margin, such as 40%. Power tools, electronics and larger-ticket items have much lower margins, so the price swings usually aren't as dramatic. When I used to work in retail management, we did this sort of thing all the time.

Bob,

So the whole point of the "sale" is simply to get the customers into the store, where they'll buy the sale item (which cost the store nothing) and then buy other goods at regular price "since they are there anyway... ?

Rob

[Mojave Bob]

You got it! Hey, think about it -- if the wrench set is such an amazing deal, everything in the store must be a great deal, right? Believe it or not, they don't put stuff on sale just to be nice to us...