Thursday, August 30, 2007

Buy a Computer Table and get a Computer Free

This year, Onam, the most important festival in the state of Kerala, was celebrated with the usual pomp and circumstance. As usual most of the retail stores came up with fantastic, super-saver Onam offers. Some of them even bordering the limits of believability. These offers inevitably propels the sales and profits in these stores. A little critical thinking reveals some interesting deductions about these special offers. These are not truly specific to Onam offers and should apply to any other offer as well.

No store would want to sell their products at a loss for a sufficiently long duration of time or large volume of sales. Unless, there was something wrong with the product or the store, that would have resulted in an inability on the retailer's part to sell the product at all, or an inability to sell all of the procured stock. So obviously these guys are selling the products at a profit

If a store is making a decent profit on their sales, in spite of the special offer, then that would mean one of two things - a) They were already making a much higher profit when the offer was not on, or b) They had hiked up the prices to provide enough leeway for unbelievable price slashes.

It is interesting to see that most, if not all, people fall for these gimmicks. It is as if they totally forget basic math when they see these kind of offers. Sometimes some of the offers are so funny that even a primary school student could calculate that these customers are being taken for a ride by these stores.

Since I am into the computer retail business I monitor most of the special offers in the local market. Most stores take around 1.5K to 2K margin on computers. During this Onam season I have seen offers that claimed to give goods worth more than 6K free with purchases of computers. The prices were so much jacked up to include the 6K plus their normal margins.

I don't believe in giving such tall claims. We believe in a shoot straight policy at Zyxware and did not bother giving such offers during the last onam. I had half a mind to give an offer though - buy a computer table (for 20K) and get a computer free :). I am sure I would have had a few enquiries even if I had given that offer.