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Thread: Prices falling as retailers offer big discounts

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    Default Prices falling as retailers offer big discounts


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    Default Re: Prices falling as retailers offer big discounts

    If you read through your own link, as well as many other commentaries, the point actually is that ...

    - higher gasoline and food prices have resulted in reductions in retail sales of 'non-essential' goods ( at least outside the 'rich' / luxury market ).

    - attempted price increases on some goods that have been strongly affected by rising 'input' costs, like record cotton pricing driving more expensive US clothing prices, have reduced retail sales of these items even further

    - as a result many US retailers have been 'stuck' between a proverbial rock and a hard place. They face a choice of sitting on inventory even longer in hopes of eventually selling at full retail price in order to actually turn a profit, or a choice of 'dumping' inventory at or below cost in order to free up their 'trapped' cash.

    - the ticking clock has now forced retailers to 'dump' inventory in order to deploy their otherwise 'trapped' cash to purchase new inventory for the fall season. However, this 'dumping' is going to adversely affect next quarter retailer earnings big time.

    So yes there are some decent bargains to be picked up right now ... albeit at the expense of the retailers and their stockholders.

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    Default Re: Prices falling as retailers offer big discounts

    It shows the laws of supply and demand still work. Sellers can't raise prices more than buyers are willing to pay. Eric was predicting big increases in the price of clothing. Instead we are seeing buyers offered deep discounts.

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    Default Re: Prices falling as retailers offer big discounts

    ^^^ arguably that was the sole result of retailers underestimating the spending power ( or lack thereof ) of their customer base when the retailers ordered product from wholesalers a few months ago. Thus the retailers are currently experiencing a 'one shot' necessity of dumping excess inventory that they cannot 'sell' at prices that will allow the retailer to still turn a profit.

    For a fact the retailers paid higher prices to the wholesalers a few months ago when they ordered product for the summer season. And for a fact those retailers are not going to be able to turn a profit on their unsold inventory of summer season product. Thus the retailers and their stockholders are going to absorb this loss in order to free up 'cash' with which to place new orders with wholesalers. Just as factually, the retailers are going to be paying higher prices to wholesalers for the product they must order now in anticipation of the fall and winter season. To avoid repeating the same 'mistake', as well as to restore profitability for themselves and their stockholders, the retailers are going to order far less product for the fall and winter season. And those retailers are going to put that product on their shelves at significantly higher retail prices ... retail prices that reflect an adequate profit margin. Thus US consumers will have no choice but to pay those higher retail prices, and there won't be a repeat of the current 'fire sale' when it comes time for 'back to school' clothes shopping a couple of months from now.

    In regard to the inelasticity ( no pun intended ) of 'minimum' demand levels, at some point 'back to school' clothes shopping simply can't be postponed any longer. My own parents tried this the year I turned 13 ! While wearing last year's dress on the first day of school took the hemline from my knees to an inch below my butt, and took the bustline to the point of my top buttons being strained enough to threaten popping off the dress and poking someone's eye out, made me VERY popular ... it also prompted my parents to take me shopping that very night with little regard for the price of new clothes !!!

    So indeed the laws of supply and demand will still hold true. There will be less 'supply' of product due to lower volumes of retailer orders from wholesalers, thus higher retail prices in the face of somewhat inelastic 'minimum' levels of consumer demand. And just like 'investments' in the larger US economy, any consumers who can 'afford' to 'invest' money right now to buy heavily discounted products and 'hold' them until next summer will 'profit' handsomely thanks to the retailers' mistake in judgement.

    ~
    Last edited by Melonie; 07-03-2011 at 06:07 AM.

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    Default Re: Prices falling as retailers offer big discounts

    Quote Originally Posted by Melonie View Post
    ^^^ arguably that was the sole result of retailers underestimating the spending power ( or lack thereof ) of their customer base when the retailers ordered product from wholesalers a few months ago. Thus the retailers are currently experiencing a 'one shot' necessity of dumping excess inventory that they cannot 'sell' at prices that will allow the retailer to still turn a profit.

    For a fact the retailers paid higher prices to the wholesalers a few months ago when they ordered product for the summer season. And for a fact those retailers are not going to be able to turn a profit on their unsold inventory of summer season product. Thus the retailers and their stockholders are going to absorb this loss in order to free up 'cash' with which to place new orders with wholesalers. Just as factually, the retailers are going to be paying higher prices to wholesalers for the product they must order now in anticipation of the fall and winter season. To avoid repeating the same 'mistake', as well as to restore profitability for themselves and their stockholders, the retailers are going to order far less product for the fall and winter season. And those retailers are going to put that product on their shelves at significantly higher retail prices ... retail prices that reflect an adequate profit margin. Thus US consumers will have no choice but to pay those higher retail prices, and there won't be a repeat of the current 'fire sale' when it comes time for 'back to school' clothes shopping a couple of months from now.
    How do you know this? If retailers order far less product, what are the wholesalers going to do with the excess inventory?

    Quote Originally Posted by Melonie View Post
    In regard to the inelasticity ( no pun intended ) of 'minimum' demand levels, at some point 'back to school' clothes shopping simply can't be postponed any longer. My own parents tried this the year I turned 13 ! While wearing last year's dress on the first day of school took the hemline from my knees to an inch below my butt, and took the bustline to the point of my top buttons being strained enough to threaten popping off the dress and poking someone's eye out, made me VERY popular ... it also prompted my parents to take me shopping that very night with little regard for the price of new clothes !!!

    So indeed the laws of supply and demand will still hold true. There will be less 'supply' of product due to lower volumes of retailer orders from wholesalers, thus higher retail prices in the face of somewhat inelastic 'minimum' levels of consumer demand. And just like 'investments' in the larger US economy, any consumers who can 'afford' to 'invest' money right now to buy heavily discounted products and 'hold' them until next summer will 'profit' handsomely thanks to the retailers' mistake in judgement.

    ~
    That's true with school clothes, but adults can hold off much longer on buying new clothes for themselves. I'm sure some of your classmates did appreciate your parents' attempt to save some money on clothing.

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    Default Re: Prices falling as retailers offer big discounts

    If retailers order far less product, what are the wholesalers going to do with the excess inventory
    you can already see what the Chinese wholesalers and export manufacturers are doing in the face of reduced orders from WalMart et al ... they're losing money and looking to outsource to Vietnam in an attempt to restore profit margin on lower volumes !!!

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