In today's world is hard to find one person that has brand loyalty. Add to that the fact that a lot of people are broke, consumers are going to only buy what's on sale and leave.

That's okay, they'll just make it up on volume.

Looks like my wife is getting an amethyst necklace for Christmas. Nobody tell her.

Hey subby, do a little research into these things called "loss leaders". It's exactly how retail works.

Free suff? Free shipping? Not sure what the problem is here.

How much do you figure that necklace is really worth, maybe $9.99?

IStateTheObvious: Hey subby, do a little research into these things called "loss leaders". It's exactly how retail works.

I was coming here to say this. However, does a loss leader work on an internet site? It makes more sense for a brick and mortar store I would think...

CONSUME CONSUME CONSUME

TravisBickle62: How much do you figure that necklace is really worth, maybe $9.99?

At most.........$5 comes first.

Ah, it's the 90s again. Good times, good times.

I thought this article was about Groupon

Yeah best buy, wall mart, target have used items all the time to get idiots in the store, then sell them shiat they never need for twice the price.

You're kidding, right subby? Loss leaders is a grand tradition in retail that should never be questioned..

How do I know Subby has never worked retail?

It is all about the butts in the door (or eyeballs on the site). Pick something that either is a slow seller or you picked up on a sweet deal and give it away. The sell the crap out of everything else in stock. Done right, you not only get today's transaction, but many more over in the future.

You more than make up for the loss.

TravisBickle62: How much do you figure that necklace is really worth, maybe $9.99?

Without looking closely, I would guess the Jobber (wholesale) price is $10-20. Maybe a bit higher if the stone is worth something.

Looks like their promo is working to bring in the traffic as Stauer's website seems to be down for the count at the moment.

Fricknmaniac: That's okay, they'll just make it up on volume.

Nerdy yet entirely appropriate :

http://www.giantitp.com/comics/oots0135.html

Cincinnati Kid: IStateTheObvious: Hey subby, do a little research into these things called "loss leaders". It's exactly how retail works.

I was coming here to say this. However, does a loss leader work on an internet site? It makes more sense for a brick and mortar store I would think...

Depends. People will come back if they like a site and a site has good deals in general. But if you only have one amazing deal and then your prices are higher than Amazon forget it.

One other trick is, of course, the shipping and handling scam, where they make up the loss on a fee.

ddam: In today's world is hard to find one person that has brand loyalty. Add to that the fact that a lot of people are broke, consumers are going to only buy what's on sale and leave.

Totally agree, bro
-sent from my iPad 2

MusicMakeMyHeadPound: Fricknmaniac: That's okay, they'll just make it up on volume.

Nerdy yet entirely appropriate :

http://www.giantitp.com/comics/oots0135.html

First thing I thought of, too. +1 internets to you.

What is a loss leader, Alex?

Fark never ceases to amaze me with it's lack of economic understanding. Keep up the good work.

Anyone getting the site to work?

There are 8 necklaces at $0.00. I wonder if they reduce shipping costs for multiple items?

>> Retailers believe giving away merchandise at a massive loss will bring in customers. THAT IS NOT HOW RETAIL WORKS

You are under the impression that business people are smart submitter ?

Their response to the massive lack of demand has been to fire people thus increasing the lack of demand.

Stauer - I believe I've seen their full page ads in Car and Driver. They are usually for some watch based on a "rare" design that should be worth $30,000 but they will sell it to you for only $150 plus a high shipping cost.

And they just got Yahoo to write an article ad for them.

IStateTheObvious: Hey subby, do a little research into these things called "loss leaders". It's exactly how retail works.

Yes, volume based retail very much operates on loss leaders. In harder economic times it can be a reasonable investment to acquire sales. Actually most of what works in business would stun most of the armchair capitalists we find on Fark.

But this tactic worked in 2000 for the dot coms and...

...oh wait.

Fricknmaniac: That's okay, they'll just make it up on volume.

This can actually be true. When people discuss that a company is taking a loss on an item, they always seem to leave out the fact that there are two types of costs, fixed and variable. Fixed costs will never change, no matter how much you sell; things like rent. Variable costs are costs that change based on the volume you sell; things like screws that go into an item. When a company figures out that the cost of an item is $X, they include both costs. Increase the volume sold and the fixed cost per item goes down, while the variable cost per item stays the same. Add those up and your cost per item then becomes $Y, where $Y
I'm not saying this plan always works, but the old saying that you can make it up in volume can be true sometimes.

Why wouldn't loss leaders work for internet sites? People might purchase something else as well, or at least remember the site and come back to it next time they want something.

That's not the whole concept of loss leaders though. There's also been studies that determine what people look at to decide whether a store is cheap or expensive. They look at stuff like bread, baked beans, milk, canned tomatoes, and if those products is cheap, the consumer subconsciously think the store as a whole is cheap.

The latter mechanism wont work when the internet store is announcing that they´re giving the product away.

Jobber8742: Fricknmaniac: That's okay, they'll just make it up on volume.

This can actually be true. When people discuss that a company is taking a loss on an item, they always seem to leave out the fact that there are two types of costs, fixed and variable. Fixed costs will never change, no matter how much you sell; things like rent. Variable costs are costs that change based on the volume you sell; things like screws that go into an item. When a company figures out that the cost of an item is $X, they include both costs. Increase the volume sold and the fixed cost per item goes down, while the variable cost per item stays the same. Add those up and your cost per item then becomes $Y, where $Y is less than $X, thus allowing the company to make a profit at the lower price.

I'm not saying this plan always works, but the old saying that you can make it up in volume can be true sometimes.

Apparently Fark doesn't like the Less than symbol, so I FTFM.

imi: Stauer - I believe I've seen their full page ads in Car and Driver. They are usually for some watch based on a "rare" design that should be worth $30,000 but they will sell it to you for only $150 plus a high shipping cost.

And they just got Yahoo to write an article ad for them.

yep. Stauer is a total fraud. Always selling "luxurious" pearls and other junk for $10, saying it's worth hundreds, when really it's worth pennies. Stupid Yahoo, YOU PLAYED RIGHT INTO IT.

Looks familar

Link (new window)

If this necklace is a loss leader, then it is one of the dumbest loss leaders out there. The loss leader is supposed to either (1) get the person in your store (B&M or online), sell them the item at a loss AND sell them other goods that go with it at a profit, such as an electronics store selling you a car stereo at a loss and then making up the profit either on installation or selling you accessories; or (2) lock the consumer into a product line, such as selling razors at a loss and turning a profit on the blades or selling a video game console at a loss and making up the loss when they buy games. This product does neither. I can go on their website, buy the necklace, and immediately get use out of it without buying anything else. The way to turn this into a real loss leader would be to sell matching accessories (earrings, bracelets, etc.) to go with it. I'm a bit skeptical of most online loss leaders since most online consumers are willing to get 10 different items from 10 different websites if that is the cheapest way to do it.

This is exactly why I left retail management. I can't stomach the idea of loss leaders. If I can't make at least a little profit off of any given transaction, I'm not going to do it. It's idiotic and only feeds the hunger for better "deals" that drive quality down and sweatshop employment up. It's something I object to on a moral level.

ddam: In today's world is hard to find one person that has brand loyalty.

That's largely because there's no brand stability anymore; companies frequently reduce the quality of their goods to keep the retail price down and increase profits, which means the widget you buy today may be complete crap compared to the one you bought five years ago.

I'll leave it up to the "experts" to determine how far to go before loss-leaders turn into just straight-up losses.

This is a bit of a crappy tactic though because it allows large companies to use YOUR investment dollars to keep afloat while losing money, while the local store just goes broke.

You mean I can get a super stylish, wear everywhere extra comfy tee shirt for free with my order of pajama jeans, just by paying separate processing and handling?

/$25 to ship a necklace bwah ha ha ha

iaazathot: IStateTheObvious: Hey subby, do a little research into these things called "loss leaders". It's exactly how retail works.

Yes, volume based retail very much operates on loss leaders. In harder economic times it can be a reasonable investment to acquire sales. Actually most of what works in business would stun most of the armchair capitalists we find on Fark.

Armchair capitalist here. No, really, I have no personal knowledge of how retail business works, therefore your final statement intrigues me. Go on ...

Ambivalence: Stile4aly: Looks like my wife is getting an amethyst necklace for Christmas. Nobody tell her.

I saw that necklace. It is NOT a $250 necklace. It's freaking amethyst beads. It probably costs $20 to make. THAT is what is wrong with retail. I remember years ago seeing this really high end jewelry cataog that had (ironicly) an amythest bead necklace for $799, that I could easily make for $20. But the beads were faceted so I guess that makes it so much....oh I can't even finishe that sentence it's too absurd.

Well maybe if you have the machine to make the necklace. I don't know how many beads I lost last time I tried to make a neckless. I kept throwing them at the string, but they just bounced off the table and went under the couch. There must be some trick to it.

It's just amethyst beads strung together. They're still making a profit selling it for $25. The markup on jewelry is insane. You could get the beads to make if from fire mountain for ~$10. Keep in mind they're a retailer and making a profit selling the raw materials for that price. You'd get a much better price buying wholesale in bulk.