Archive for July, 2013

To Sale or Not To Sale?

Image

Sometimes you have to totally get out of your comfort zone to look at something from a new perspective.  It’s only then that you can see things differently and you learn that your old assumptions aren’t true.

 

And sometimes your initial inclinations are reinforced.

 

I have spent the last 2 weeks in Paris.  As part of this trip I have tried to get an understanding of how Entrepreneurship and Business are practiced in the French Republic.  As part of this discovery, I had a very nice 2 hour lunch with an old American friend who has lived her for almost 24 years.  It was an off handed comment about why Paris is so crowded this time of year that got me thinking.  She said “It’s Bastille Day and you also have the Sales.”  You see retailers in France have very strict regulations on what, when and how much they can put on sale.

 

Trading laws stipulate that there are two periods for sales in France. Winter sales from January to February and summer sales from June to July. In each case, the sales last for five weeks. All goods on sale must have been in the shop for a minimum of thirty days prior to the sale date – no buying in cheap stock and selling it as a sale item. Reductions must be visibly displayed in percentage terms, labels must also show the old pre sale price and the new sale price. Retailers are allowed to reduce their prices three times in the sales – after the first fortnight, and again in the final week.

 

Outside the official sale periods, retailers are allowed two weeks in the year, to use at their discretion, for extra sales such as pre-christmas sales or spring sales.” – Tyler Cowen – MarginalRevolution.com

 

So in the interest of saving the little guy, the government has decreed that the “Big Guy” can’t compete.  Who wins in this scenario?  The little guy, the big guy or the consumer?

 

Well the little guy likes this because they don’t have to constantly chase competitors sales.   They can focus on serving the customer, getting the right product and just trying to run their business.  It is one less thing to worry about.

 

The big guy loves this because they don’t have to kill their margins with constant sales.  They can compete in many other ways.  They can do it on price by using their buying power and offering an everyday low price (think WalMart).  They can do more brand awareness advertising.  They have the tools to better target customers and manage inventories and they have the time to think of creative ways to manipulate the laws to their advantage.

But what about the consumer?  The consumer obviously is not a consideration in the legislative process.   The consumer has no one trying to lure them in by offering them a deal.  No enticing “Buy 1 get 2 Free deals”.  You take our price and you are happy with it.

 

And who else is affected?  The entrepreneur. The small guy who wants to be a big guy.  Price is one of the three factors that new companies are started on (Cheaper, Better or New).  That person can’t go out and compete on price.  Price is a major element in how every new big retailer has competed in the last 30 years.   Take that tool away and the market is close to frozen so neither the big guy or the little guy needs to worry.  It’s détente and the loser is the consumer.  No market shake up just harding of the arteries of commerce.

 

Just another example of freezing the marketplace for the incumbents.

 

 

 

 

 

,

Leave a comment