My friend, whom I thought was smart, excitedly explained to me how an incredibly good deal he had made - the furniture had been reduced by -70%! I didn't dare to spoil the atmosphere by starting the lecture of how it really went. But now I am about to spoil it - welcome to the fun...
I considered for a long time whether I should start writing about this sensitive topic at all because even we often reduce our prices in our store - but not all the time and extravagantly. Still, this thing might totally backfire. So, in short: turn against me. Otherwise, the subject causes me undue anxiety, because there has been surprisingly little public debate about it. We Finns are bad at talking about money anyway, especially now that I'm dealing with it from the seller's point of view. I still couldn't resist the temptation, because I feel the topic is important for the entire industry - and especially for its appreciation.
I have often wondered why there is a constant sale in the furniture industry. According to research, it has become most prevalent in the furniture industry. Consumers are used to the fact that it's not worth buying a normal-priced product because soon you can get it cheaper. This started when big furniture stores came to Finland, and they started to compete bloodily with each other for customers. Funny shops, from Christmas ham to spa tickets, also came along. The newspapers made a profit with the percentage of fireworks on their pages. Since then, it simply became established as a method of operation, which has secretly become embedded in today's digital marketing as well.
"We don't really know what the correct price of the goods to be pushed in the offers is."
This whole hassle has caused an interesting phenomenon. We don't really know what the correct price of the goods to be sold in the offers is. It is as obscure as the guide price of a cheap scarf in a Turkish bazaar when they are sold in the "good price - only for you" campaign that has been going on since ancient times. Even in that business concept, it is done deliberately so that the customer gets stuck in the image of a big discount percentage. The concept has been in operation for a few thousand years - and still works.
A behavioural model is pre-installed in the human operating system, in which judgment is lost when a huge discount percentage is hammered in the back of the head. There will be a primitive feeling that I must either flee or act immediately before the others can take everything. This is also part of the psychology of discount sales, where the customer is pressured to decide on a precisely structured time window. There are more of those windows all the time, but the consumer gets the impression that this window is exactly his, and there won't be any more tomorrow. According to the Finnish Competition and Consumer Authority, in reality, the product is often on offer for 80-90% of the sale time, which means that the offer price is actually the normal price.
Image: Street view from Lahti's main street in 2013
The constant sales have caused a boom in the industry, which makes most of the industry price-driven. That sounds like a pretty dark future scenario, where every day would be a Friday and a black one.
By the way, why do we have to compete only on the price of furniture? Aren't there other values? Competitive advantage can be something else: design, responsibility, innovations, problem-solving, service, experiences or stories.
"According to the Finnish Competition and Consumer Authority, the product spends 80-90% of its sales time in an offer."
At the end of this, a clarification for the sake of clarity. We are by no means against promotional campaigns. They are part of normal trading and accelerating sales with them is acceptable and also in the consumer's interest. On the other hand, we are against continuous big sale campaigns and deliberate manipulation of guide prices. Our guide prices are correct, so we don't like silly "per cent on per cent" scams.
My friend, if you're reading this - sorry, but no one can consistently sell at -70% off. It would be cheaper and easier for the seller to give the buyer money than to manufacture and transport large pieces of furniture without a gross margin.
"Alea iacta est" - said Caesar as he entered the bazaar.
- Tapio
Image: View from the main street of a Turkish city in 2023