Wednesday, March 26, 2008

Bargaining

Around 10 years ago, while I was visiting family friends in Canada I heard this story of a Canadian official. In response to complaints that welfare recipients were not getting enough money to eat the official said that people should go to the grocery store and bargain for lower prices. This seemed rather silly to me as teenager, you can’t bargain with a grocery store. It also seemed silly to my father’s Canadian Economist friend who told the story, so it isn’t some difference between the US and Canada.

The New York Times had an article about bargaining for Electronics with megastores like Best Buy, Circuit City:

It appears that you can bargain at these types of places.
So why is bargaining out of fashion at a North American grocery store, but acceptable on a car lot or perhaps an electronic store?

If I hazard a guess it would be that bargaining makes more sense on big ticket items. Imagine how long it would take if I bargained on everything in my grocery cart. This is because there are fixed cost to bargaining. Second a company needs to empower employees to make deals. This works well for cars, since negotiations can be made at the reduction of the salesperson’s commission.





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4 comments:

Jennie said...

As a former grocery store employee, I can also tell you that grocery stores also don't have a huge profit margin on food items, so there's not a lot of wiggle room there. Grocery stores only put stuff on sale when their distributor puts stuff on sale-- the mark-up stays the same. (Unless, of course, something's about to go off.)

Josh Hall said...

When I lived in D.C. I knew a family that would bargain at the grocery store - but they were savvy about it. They knew when the store was trying to clear product that was either about to go bad or be discontinued. Their offer to the store was always to buy whatever was left if the store would cut the price by an additional 50%. After weighing the opportunity cost of the shelf space and/or the chance for spoilage, more often than not the store manager would take them up on the offer. Of course, we all aren't willing to purchase a shopping cart full of aging grapes, as I once saw them do.

Kate said...

I'm probably not a good model, living in Africa way too long, but I've bargained on things in the US successfully that were somewhere between groceries and cars, including but not limited to kayaks and sneakers. I think there are two keys to success:
1. There is a legitimate reason for a price deduction (demo model, minor damage, etc)
2. The store is independantly owned, leaving store employees with more control than in major chains

Seth Gitter said...

My parents bought a floor model for a discount TV which lasted from the early 80s to the mid 90s.

I tried to find this good article where a guy bargained for everything he purchased in a day with some positive results. Maybe I should try to bargain more.