Chapter 51 Question 044

Why Are Appliance Retailers Knocking Dents In Protectors And Refrigerators? A small number of household appliances suffer minor impact damage during shipment from the manufacturer to the retailer.Instead of sending the appliances back to the factory for repairs, retailers sell them at a reduced price.Sears department store has long adopted the practice of selling defective products at reduced prices. However, it was recently reported that a few days before the sale, the Sears department store had factory workers knock dents in the sides of otherwise flawless appliances.Are these reports rumors?Or are retailers deliberately destroying some of their merchandise for sound economic reasons?

Again, the goal of any discounting arrangement is to provide a price break to potential customers who would not buy the product at list price, while minimizing other buyers to take advantage of the discount.The electrical retailer probably discovered by accident that a slight flaw on the refrigerator is a perfect threshold to separate customers. To participate in the defective sale, customers must pass three hurdles.First, he has to go to the trouble of finding out when the sale will take place; second, he has to remember the date and make a special trip to the sale on that day; No one can see it afterwards).

Most high earners don't even bother to cross a threshold.But as Sears discovered, there are plenty of price-conscious shoppers happy to clear all three of these barriers. In this way, if there are not enough defective electrical appliances during the transportation process, the retailer will naturally ask the employees to take a hammer and go to the warehouse to knock out some defective products the day before the annual sales meeting. profitable.This practice increases appliance sales and reduces the average cost per unit of an appliance, thereby creating the possibility of lower prices for all customers.