WHO PAYS LIST PRICE?

Everybody Can Now Get It Wholesale

WHEN General Electric gave up Fair Trade and minimum-fixed prices for its wares last week (see Retail Trade), it belatedly recognized a basic fact of modern U.S. retailing. Nobody, or practically nobody, pays list price any more--for appliances, or for autos, furniture, cameras, jewelry, even baby buggies. As one Milwaukee retailer says: "The price tag on my merchandise means nothing."

While no one knows the percentage of total retail sales at cut-rates, merchandisers estimate that 90% of all small appliances are sold below list price, and say that cut-rate sales in other lines are growing fast. Several million young families, whose homes are from 75% to 90% stocked with possessions bought lower-than-list, buy no other way. Thus, while economists worry about the seeming paradox of price rises in the face of a general economic decline, the fact is that the prices contained in the rising Consumer Price Index are not what people really pay. Auto prices last year went up 3-9% at wholesale and 1.5% at retail according to the indexes. But customers got such heavy discounts that they actually wound up paying less than the year before.

For the death of the old-fashioned list price, the U.S. businessman has largely himself to thank. In the days of postwar shortages, the oldtime salesman gave way to mere order-takers, who sold only on the basis of price. And since the "list price" often differs widely from store to store, customers have lost faith in quoted prices, trust only in their own ability to haggle like shoppers in an Oriental bazaar. Says Aubra Johnston of Chicago's Better Business Bureau: "The so-called manufacturer's list price is for the most part baloney. The manufacturer inflates because the retailer demands it. The retailer says he must have it because the customer wants to believe he has been given a big allowance."

Not even the discount houses had any idea that cut-rates would snowball so far so fast. To compete with low-overhead discounters, even the biggest stores run frequent "warehouse sales," "specials," "closeouts," trading at 10% above cost v. the standard 30% to 40% markups. Originally, the big stores restricted competition to a few fast-selling items; now they match discounters dollar for dollar. Brooklyn's Abraham & Straus, Los Angeles' Barker Bros., Jordan, Marsh Co. have started running almost identical ads proclaiming an old retailing slogan: "We Will Not Be Undersold." Milwaukee's Boston Store last week advertised: "Save 22% to 50% on ... famous Westinghouse appliances." Detroit's J. L. Hudson Co. now tells customers that if they can find a better bargain elsewhere, Hudson's will cut its price to match.

The competition has forced discount houses to add delivery and credit services, advertise widely, and increase their wares until the old, appliance-cluttered cubbyhole is hardly recognizable. The increased cost has shot down many a fly-by-night discounter. But those who survive are accepted as legitimate businesses with all the rights of established stores--and then some. At first, discounters got only distressed merchandise and off-brand appliances. Today, they are such important customers that many manufacturers rate them higher than department stores. One fast-rising newcomer: the "pricelegger," who out-discounts the discounter by operating from an office filled with catalogues, is able to push out a flood of goods for as much as 60% off.

Nowhere does list price mean less than in the U.S. auto industry. Says Ward's Automotive Reports: Discounts are here to stay. "The 25% dealer price markup is greater than can be justified by the services performed by the dealer." The manufacturers' suggested list price has also become meaningless as the difference between it and the actual "delivered price" that the customer pays has increased. The original list price does not include taxes, delivery charges and optional equipment, which often add $1,000 to the cost of a car. As customers have learned to bargain harder, the percentage off the delivered price has risen; the average discount on new 1958 cars is 15%, and many dealers give better than 20% to sew up a sale. The unit profit is slim, but they make just as much money selling 25 cars at 5% profit as five cars at 25% profit. Moreover, the owners of those 25 cars come back for service.

To many oldtime retailers, the day of the discount spells doom for the small neighborhood businessman, who has neither the capital nor the market for a high-volume, low-price operation. But while it is rough on retailers, it is fine for the U.S. consumer, who at long last has learned to call the tune. In the long run, it may also prove just the right tonic for U.S. businessmen, who will be forced to pare their soaring distribution costs--which are often equal to production costs--down to realistic levels.

This file is automatically generated by a robot program, so reader's discretion is required.