When a Deal Isn’t a Deal

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Sports Authority recently announced it is going out of business – closing all of its stores by the end of summer. This past week I received two emails from their CEO advising the store closures and corresponding going out of business sale.

Many people in my family’s social circle were talking about this and mentioning how they need to get to Sports Authority as soon as possible to get some deals. I went on Thursday, the first day of the sale to check out tents and camping gear. I have never seen such a line at the Sports Authority register, not on a weekend and certainly not on a Thursday evening. Unfortunately, I was thoroughly disappointed in the sale.

The Fallacy of Sales

The store had displays and signs everywhere reminding me this is a “going out of business” sale. I, like most people, was interested in getting a deal. The going out of business sale for tents was 10% off. Are you kidding me? I pulled out my phone, checked the price of the same tent on Amazon, and found that Amazon’s price was lower. This was not a deal. It wasn’t just tents, it was just about everything I looked at. Now some of the items were actually 20% off, which made their sales price roughly equal to Amazon, but still not worthy of a “going out of business” sale. With respect to the ad, I didn’t see anything 30% off, but I also didn’t look at every single item in the store – just the more popular stuff. Maybe the 30% off was a pack of gum.

Consider that, over the years, Sports Authority has routinely advertised sales at 25% – 50% off in the weekly circulars. It appears they have a higher profit margin during their going out of business sale than they do with their normal weekly sales. Add to that the fact that when you purchase something, the receipt prints out and the cashier stamps on it “all sales final” before handing you the receipt. There are no returns! This is a huge boost to their profitability. It’s too bad stores can’t use a “going out of business” sale all the time.

Headline Risk

Oftentimes when it comes to sales, investing or just about anything else in life, we rely heavily on what the headline says and quickly draw conclusions. Marketers and journalists know this. We seldom take time to reflect – how good is this sale? (As a side note most Black Friday sales are not the best of the year). An investor may allow headlines to influence their financial decisions without considering the bias of the reporter/agency, what the other side of the story is saying or whether the news of the day is even material to their long-term investment strategy.

Reflection is seriously lacking in our society. We are a society of instant everything – feedback, gratification and response. Perhaps it would do us some good to begin practicing reflection in our daily lives, both when considering financial and non-financial situations.



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