How to Watch Out for Fake Sales

J.C. Penney's new pricing strategy reportedly sheds its former pricing schemes.

ByABC News
January 31, 2012, 7:47 AM

Jan. 31, 2012— -- I read dozens of articles a week on consumer issues, my version of "continuing ed." There's always one that sticks out as most intriguing, and this past week it was a New York Times story by Stephanie Clifford about how J.C. Penney's new CEO hopes to improve the department store chain's fortunes by eliminating what he labeled "fake prices."

Wow! This is the most directly I have ever heard a retailer speak of the pervasive practice of marking prices up so that you can mark them down. In other words, some store put a high "regular" price on an item, then deeply discount it to try to make customers think they're getting a bargain. Ron Johnson, the CEO, believes customers are not fooled by that tactic.

At J.C. Penney, the Times reported, items that cost the chain $10 wholesale had a retail price tag of $27 a decade ago, compared with $36 last year. And yet, paradoxically, in 2011 customers actually got many of those $36 items for less than $27 because J.C. Penney offered so many sales and coupons. Johnson wants to simplify all that, embracing just three price tiers at the chain: everyday prices, monthly promotions and clearance items.

How refreshing! J.C. Penney is not the only store to have engaged in this kind of price hoopla to try to generate excitement. It's just the only one to admit it -- and ditch it. I was shopping at a store-that-shall-remain-nameless this past weekend and I noticed that nothing in the store was priced at full retail. So that brings to mind a cautionary phrase I coined years ago: Not every sale is a bargain and not every bargain is on sale.

Say you buy a gallon of milk every week for $2.50. Then, one day, you walk into the supermarket and see a huge sign: "Today only! Milk just $2.50!" You would know that's ridiculous because that's what you always pay for milk. But what about things you don't buy so often -- such as refrigerators, stereos and winter coats? How will you know if the big sale claims are for real?

To be a truly savvy consumer you need to be a good comparison shopper. If it's any consolation, to be a good comparison shopper, you need to be a truly frequent shopper. Or you need a smart phone bar code scanner thingie, although shopping till you drop to get a handle on prices is way more fun, especially for women. (An aside: my husband wanted to leave the store last weekend, just as I was getting warmed up!)

Yes, retailers have always played games to get our greedy little hearts going. Here's another one: those "compare at" price tags. You know, the ones where the store states its price right underneath the "compare at" price, which is supposedly what some other retailer charges. I know of yet another popular clothing store that marks its classic lines "50% off!" one month, then "buy one get one free" the next month and continues this cycle year-round.

Faking the original or "compare at" prices is actually illegal in some jurisdictions, but it's hard to prove because consumer watchdogs can't monitor stores every day all year round. Still, some aggressive attorneys general have brought cases against retailers for claiming merchandise was on sale, when really, it was always that same, lower price. Since there probably isn't a clipboard-wielding bureaucrat scanning price tags in your favorite store, you'll need to watch out for yourself. You've been warned!