A friend asked me the other day why the stores are selling their summer equipment at 50 to 60 percent off, even though the weather is still so warm. He finds it strange because there is a high demand for it, so they could make more money by keeping the prices up for a couple more weeks. However, this would lose them money, wouldn't it?
Because they all know winter is coming, the weather is going to change, and that demand is going to dry up incredibly fast. And they know that while it is hotter than normal right now, their systems have told them to sell, regardless of the weather. And this means that if one puts their merchandise on sale, they pretty much all have to put their stock on sale, otherwise they will be left with a saturated market, and a storeroom full of unmovable items. They can then sell even cheaper, or hold until next season.
This is one of the many problems with homogenous products and the amount of chain stores selling identical or slight variations of the same brands and products. There is so little differentiation in the marketplace that it all just comes down to price. So when one sells, all sell. If you know the drop is coming anyway, it is about holding out as long as possible, but selling as early as possible to maximise the sales at the top end, and the sales on the way down.
There are some deals to be had.
If you are already in the market for something. Otherwise it is just buying stuff that is not necessary. Many people go crazy whenever there are sales on anything and end up spending a lot more money than they have, on things they don't really need. But sometimes if the timing works out like when the terrace we have built is ready at the end of the summer, then it is possible to pick up furnishings pretty cheap - though they will be used more next year.
And this is also a bit of an issue that most people have, where we want to be able to use what we buy straight away, which means we end up not buying what we will use next year on sale now, because it will just sit unused until then. For instance, I am looking for a new grill, but I will only get one if it is a really really good deal. However, while we don't need it now that summer is ending, I also know we will likely need one next year anyway, as the one we have inherited from my in-laws is on its last legs and struggles to heat. But there is still that "new toy" appeal and if I got it, I would want to use it straight away.
I haven't found one suitably cheap enough yet.
I will wait until mid-autumn.
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Or mid-winter.
My friend, who is the head of finance at a pharmaceutical is no stranger to the markets, but at the same time, he looks far longer than a three-month season, and has a very different kind of product range he deals with. For instance, there is clear differentiation in the market for a lot of the pharmaceuticals, so they aren't competing on price, or on seasonal fashion, or on impulse buying. They don't have to reduce the price of their products at the consumer level at all.
They work on very different algorithms.
As they aren't dealing direct with the consumer, they run their deals through governments and hospitals and pharmacy chains. It is a different kind of marketplace and one where I suspect a lot of wastage happens, and the consumer ends up paying far more than they should be paying - or the taxpayer. And the consumer is willing to pay, because the trend they are trying to buy for, is the increasing pain or whatever ailment they have, so they are willing to overpay. As far as pharmaceutical companies are concerned, they don't need to sell cheap, because the market is willing to pay the price directly, or indirectly.
More pain = More profit.
And business is good.
Taraz
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