Craftsman Professional 17 in. Drill Press 179.99 (normally 529)

[ironhat]

I know that we're all tired of hearing about this but I got my e-mail confirmation this afternoon. Talk about confusion.

[DaveStL]

This Is Getting Weird, But the Deal Might Not Be Dead

I, too, got an email this afternoon that the press was ready for pickup. After being told some lame stories Friday about why the order pickup was delayed, and then that afternoon that the price was a mistake but the order would be honored, the cancellation email came Friday night. I was still steamed at their customer service managers for jerking me around, and on reflection the original post sounded a bit mean-spirited. For whatever reason, someone there stepped up, and I'm happy with the result.

So don't cancel your orders. The deal might not be dead.

[dkerfoot]

I can see that you've never worked in a big box retail environment. Or your math skills need a bit of work.
So for your information here is the basics:
If the MSRP of an item is $500 then the cost was somewhere south of $250 this is called 50% markup. It has been the backbone of the retail market for many years and is generally the regular price of the item.

Well, calling it a 50% markup would be a bit redundant, so it is usually referred to as Keystone pricing and I am well aware of it. It applies to bread and pencils and footballs. It does not apply to TVs or cars or drill presses. Unless of course, when specifically designed for a discount channel where the MSRP is set to an artificial level at which the product is never actually sold - Think HF.

[maxparot]

Well, calling it a 50% markup would be a bit redundant, so it is usually referred to as Keystone pricing and I am well aware of it. It applies to bread and pencils and footballs. It does not apply to TVs or cars or drill presses. Unless of course, when specifically designed for a discount channel where the MSRP is set to an artificial level at which the product is never actually sold - Think HF.

Actually it does apply to virtually every product carried by so called department store Sears, JC Penny, Macys, etc. Their buyers won't even look at a new product that doesn't have that pricing structure. Established name brand products may be stocked in more limited quantities at reduced margins to attract customers. But more often Store brands or off brands are offered at lower prices but retaining the 50% markup to ofset the smaller margin brand name sales and offer more choices. Profit margins in large retail organizations are not slim when compared to small resale organizations.

[stormdog74]

Or your math skills need a bit of work.
So for your information here is the basics:
If the MSRP of an item is $500 then the cost was somewhere south of $250 this is called 50% markup.

Be careful of YOUR math skills before you put down someone else's - a 50% markup of $250 would be $375...

[LCHIEN]

Or your math skills need a bit of work.
So for your information here is the basics:
If the MSRP of an item is $500 then the cost was somewhere south of $250 this is called 50% markup.

Be careful of YOUR math skills before you put down someone else's - a 50% markup of $250 would be $375...

I think you are both wrong.
I checked Wikipedia, they say Markup is
(retail price/cost)-1
so a MSRP $500 item made for $250 would be 1, or 100% markup.

its a little bit contrary to logic, I would have done it Stormdog's way had I not known better.

Reference:
http://en.wikipedia.org/wiki/Markup_%28business%29

also explains margin in terms of markup.

[SteveK2]

I think you are both wrong.

Stormdog is right (so are you btw). Dog's example was that a 50% markup over $250 would be $375. Cost plus 50%. A 100% markup would be a doubling of the cost or in this example, to $500 (as you said).

Maxparot actually described a 50% discount off MSRP.

When talking markup/markdown/discount, frame of reference is always important.

Bottomline -- its all semantics to me......I'm real happy that I got a product that normally sells for $530 for only $180.

[cgallery]

Stormdog is right (so are you btw). Dog's example was that a 50% markup over $250 would be $375. Cost plus 50%. A 100% markup would be a doubling of the cost or in this example, to $500 (as you said).

Maxparot actually described a 50% discount off MSRP.

When talking markup/markdown/discount, frame of reference is always important.

Bottomline -- its all semantics to me......I'm real happy that I got a product that normally sells for $530 for only $180.

Lots of people confuse markup with margin. An item costing $250 that is sold for $500 provides 100% markup and a 50% margin.

It is hard to know where Sears or any other large retailer will draw a line in the sand on minimum margins. That is because many of the decisions have more to do with velocity (of cash) than simple margin math.

Retailers historically required a minimum 40% margin on items. That included big ticket items like stationary tools and electronics, too. That is a minimum because of the high cost of retail. Do you have any idea of what a typical Sears store pays in rent alone?

While there have certainly been competitive pressures (especially the Internet), retailers have adapted and are still holding their own.

If it wasn't for Best Buy, printers would include USB cables. But Best Buy figured that by pressuring HP (and others) to remove the cable from the box, they had a shot at another $30 sale (at about a 95% margin, no less).

I wouldn't be shocked if Sears already went back to their vendor for the DP and had them sharing any pain (if there is any) on their mistake. And even w/o support, they may not actually be losing a lot of money on each sale. If someone told me that their normal markup on many of those tools was in excess of 100%, well, that would not surprise me.

[maxparot]

Lots of people confuse markup with margin. An item costing $250 that is sold for $500 provides 100% markup and a 50% margin.

It is hard to know where Sears or any other large retailer will draw a line in the sand on minimum margins. That is because many of the decisions have more to do with velocity (of cash) than simple margin math.

Retailers historically required a minimum 40% margin on items. That included big ticket items like stationary tools and electronics, too. That is a minimum because of the high cost of retail. Do you have any idea of what a typical Sears store pays in rent alone?

While there have certainly been competitive pressures (especially the Internet), retailers have adapted and are still holding their own.

If it wasn't for Best Buy, printers would include USB cables. But Best Buy figured that by pressuring HP (and others) to remove the cable from the box, they had a shot at another $30 sale (at about a 95% margin, no less).

I wouldn't be shocked if Sears already went back to their vendor for the DP and had them sharing any pain (if there is any) on their mistake. And even w/o support, they may not actually be losing a lot of money on each sale. If someone told me that their normal markup on many of those tools was in excess of 100%, well, that would not surprise me.

Thanks cgallery,
The original point was that the margins are not as slim as dkerfoot implied and that the loss per unit was nowhere near $375 per unit. For anyone to think that Sears is bleeding to death from this mistake and shouldn't be held responsible for their error or how they handle the error is beyond comprehension to me. Holding businesses responsible for their action or lack of them is how they learn not to repeat the error. After all these corporations are "NOT" human and they aren't entitled to make mistakes like a small business or sole proprietorship.
Further the point of this forum is to help and protect the forums members and the not Sears.

[LCHIEN]

The profits and losses go all around in a large organization like Sears which probably tries to assess actual costs and profits to serve as indicators of the performance of each "profit center".

There's several points of markup in a sales... the original manufacturer, lets hypothetically say Ryobi in this case, probably sold the DP to Sears for $150-200 in large quantities, so the cost to Ryobi to manufacture the DP (unburdened materials and labor) was probably in the $75-125 range, before they add on costs (burdened) for overhead (management, utilities, marketing, shipping, accounting, purchasing, employee benefits, etc).

Sears corporate warehoused the saw and distributed to the stores, probably invoiced the stores around $225 to $250. somewhere around 15-20% for their distribution efforts.

The profit on the DP sold for list is likely to be around $250 given normal retail margins and markup ($530 MSRP).

When they hold a nationally advtertised sale I don't know if the retail stores get a rebate on their invoiced amount... I would imagine that the markdown for sales is a cost shared with the corporate group. (store-only clearances, usually the store takes the whole hit, I would guess)

So when a item is sold at this low price point due to an national advertising goof, probably the store loses some margin and the corporate loses some. But don't forget they have 100 other tools on which they are making $250 profit at the store level so its not the end of the world for them although they surely would not like to sacrifice one sale, after all.

The other night I bought some socket extensions for $11.99 and found upon arriving home that the Sears web price was $9.99 so for principle I took it back and asked for a price match... they were very reluctant to do it (for $1.50) and I had to wait for the manager to get on the web via dialup... I should have just returned it and ordered for store delivery ( to the local Sears store, not this Sears Hardware store).
Moral check the web price at sears before buying, with free in-store delivery you might do better.

[dkerfoot]

Before wading back into this one, I wanted to do a little research, just to make sure my experience (primarily electronics and computer components) was applicable.

I looked up the prices of three different items sold by Home Depot, where I have direct access to the manufacturer's container quantity prices. (FOB Terms, 2 from China, 1 from Taiwan)

Even allowing for the possibility of additional discounting beyond the standard container pricing (rare) the margins are every bit as slim as I expected them to be.

I am hoping to talk to my BIL (retired Ryobi/TTI Executive) in the next week or so to verify whether some magic happens when it comes to margins for power tools. But, I am pretty confident that the days of keystone markups for tools are long gone.

The original point was that the margins are not as slim as dkerfoot implied and that the loss per unit was nowhere near $375 per unit.

Maxparrot, your original point was actually that this whole thing was a loss leader strategy. Then you seemed to migrate to the idea that deliberately making people angry and then paying lawyers to clean up the mess was part of Sears' marketing strategy. Only after that did we begin to discuss margins.

For anyone to think that Sears is bleeding to death from this mistake and shouldn't be held responsible for their error or how they handle the error is beyond comprehension to me. Holding businesses responsible for their action or lack of them is how they learn not to repeat the error. After all these corporations are "NOT" human and they aren't entitled to make mistakes like a small business or sole proprietorship.

I am curious as to how many employees a company has to have before they are no longer allowed to make mistakes? You seem to be saying that if a sole proprietor accidentally gives you too much change it would be wrong to keep it, but that at some magical number of employees, not only is it morally OK to keep the extra change, but really, you are helping them to become better. Is that accurate?

If so, I'll say once again that you live in a much more complicated world than me. For me, I simply don't take what isn't mine.

[dl2000]

I just wanted to point out that this post has over 10,600 views and was wondering if it might be a record for BT3Central?

DL

[LCHIEN]

I just wanted to point out that this post has over 10,600 views and was wondering if it might be a record for BT3Central?

DL

The "song game" is at 37,446 with 5000+ individual replies as of a few minutes ago, so the drill press (with only 162 replies) its nowhere near a record.

[maxparot]

Well Doug since you did wade back into it:
I'm sure that most people here are aware that Home Depot is a Big Box discounter that has made it's name for itself by coming into a area and discounting their prices and driving other competitor out. Many chains of hardware stores have fallen to them already. Channel Home Centers, Rickles, Pergament to name a few just from the east coast. Do you really feel that using HD costs and pricing is a good way to judge.
As for how large;
A first step in determining may be if they are a publicly traded company and as such having stock holders to report to. Second may be if the working budget is larger than that of a state or small country. But the real factor should be if the size of the company does by it's nature require redundancy that makes multiple people responsible for overseeing that ads that have the potential to cost the company both profits and customer do not make it to print or the web.
And as a final consideration if the company keeps a legal staff as full time employees when their business is retail sales I'd say you've found a company that should be held responsible for their advertizing among other possible liabilities.

[dl2000]

Ok. Maybe a Swap & Sell record???