Good Question: How Do Stores Decide What’s On Sale?

MINNEAPOLIS (WCCO) — If you walk into any Target or Walmart, you might see paper towels on sale one day, toothpaste the next and laundry detergent after that.

So, how do stores decide what’s on sale?

“It’s a bit counterintuitive,” said George John, professor at the University of Minnesota’s Carlson School of Management. “In a modern economy like ours, most stuff goes on sale when the sales volume is high.”

Hams are on sale at Easter, turkeys at Thanksgiving and clothes at Christmas. Retailers use sales to bring people into their stores with the idea consumers will buy more than just what they were originally looking for.

sales Good Question: How Do Stores Decide Whats On Sale?

(credit: CBS)

It’s a reality in the era of intense competition within the retail sector.

“For example, a few years ago, JC Penney had a new CEO and he said, ‘We’re going to stop all these crazy sales,'” John said. “Guess what? Penney’s sales died and the CEO lost his job.”

John says companies have huge staffs that determine promotional calendars. Brands, not retailers, generally decide when to put their products on sale. According to John, the brand will generally cut the wholesale price to the retailer during the sale.

“It’s very rare the retailers put something on sale all by itself,” he said. “The retailer usually gets help from the manufacturer.”

As for commodities — like apples or milk — John says it’s usually the retailer using a sale to drive traffic into the store.

“If you look at the uptick in sales of a grocery item, when they put it on sale, the uptick is massive,” John said.

More from Heather Brown
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