Shelf Life

The untold costs of discount prices

Marketplace Staff Jul 6, 2009
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Shelf Life

The untold costs of discount prices

Marketplace Staff Jul 6, 2009
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TEXT OF INTERVIEW

Kai Ryssdal: American consumers appreciate nothing so much as a good bargain. Spending less than full price. What often happens, of course, is that being cheap winds up costing us more money in the end. That’s what happened to author Ellen Ruppel Shell, and it led to her latest book, “Cheap:the High Price of Discount Culture.”

ELLEN RUPPEL SHELL: I had a great outfit that I bought, of course, on super sale. I was so proud of myself. And then I went to find a pair of boots, and found, you know, mostly clunky, not very nice looking boots. And I asked the proprietor, gee, can you bring me some more stuff? And he brought me out this luscious pair of Italian boots, and I instantly fell in love, until I saw their price tag, and I said, oh, god, I really can’t justify this purchase. So I bought a pair of the clunky boots that were a lot cheaper; they really didn’t fit me too well. I wore them the next night, wasn’t very happy with them, threw them to the back of my closet. Never wore them again. So the question is really how much did I save by buying those cheaper boots, wearing them once, and not wearing them again?

Ryssdal: Absent the rest of us having a bad boot experience, as you did, though, how do we collectively change that mindset of, “Oh man, I’m getting a deal!”

SHELL: We celebrate bargains, and we are being trained to look first at price, and second at the object we are considering. So when you go in, I suggest to consumers, to shoppers, and to myself, I now look at these different items, whatever it may be, whether it’s a pair of socks, or a sweater, or a wrench, and I think first, do I want this? Is this going to work for me? Is it really going to fill my need? And if so, then I look at the price. If I can afford it, I go forward. If I can’t afford it, I move on. Doesn’t mean I don’t look at the sale racks, I certainly do, but I am no longer, and I encourage people, to be no longer driven first and foremost driven by price.

Ryssdal: This actually is part of a different kind of discussion, the fact that American consumers really have no idea of how prices are set. I mean we walk in, and we see a price, and we’re like, OK, that’s the price. But really we don’t understand the dynamics behind that at all.

SHELL: You know, it is absolutely fascinating, and I didn’t either until I researched this. How many of us, for example, have ever paid full price for a mattress. There’s an object, you know, it’s always, quote, unquote, on sale. Well, it’s really not on a sale. That’s the real price of the mattress. The other mattresses in that department store have higher prices, but the merchant doesn’t really expect to sell those mattresses. He rotates all his mattresses into the sale pile, and he expects to sell them at that sale price, which is actually the full price. There are legions of PhDs who help large chain stores in particular set both the price, and the mark-down price. And they’re exquisitely sensitive to changes in consumer behavior. They can change prices daily. These mark-downs are set according to consumer behavior to maximize the chance that these items will be bought. And what once was an art is now a very, very sophisticated science.

Ryssdal: Ellen Ruppel Shell teaches at Boston University. She writes for the Atlantic magazine. And she’s written a book, too. It’s called, “Cheap: The High Cost of Discount Culture.” Ellen, thanks a lot.

SHELL: Thank you so much.

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