Cracking the Code: How Not to Pay Retail --- As Retailers Rev Up
Discounts, Shoppers Deploy New Tricks; If It's Tuesday, Shop for CDs
By Jane Spencer
Wall Street Journal
. (Eastern edition). New York, N.Y.: Nov 27, 2002. pg. D.1
With CDs and DVDs, a growing emphasis on sales volume means prices actually rise over time, a pattern that
seems counter-intuitive to most shoppers. In an effort to capitalize on the excitement created by a new release,
stores launch deep discounts at the outset to drive demand even higher. At J&R Music & Computer World, CDs
are cheapest in the five to seven days after their release.
Not every chain adheres to such a rigid pattern: Tower Records, among other stores, keeps prices low as long as
the CD remains a bestseller. Still, this month and next are a great time for CD shopping. Music labels have
stacked the holiday-season decks with a disproportionate number of big-name new releases, including albums
from Jennifer Lopez, Snoop Dogg and Paul McCartney, and a second soundtrack to Eminem's movie "8 Mile."
Billboard.com publishes a list of releases the week before.
In addition, the entire videogame market works on a five-year cycle, tied to the release of new PlayStation2 game
consoles ($199). The price on newly released games starts to fall in the third and fourth year of the console
lifespan. Since PlayStation2 was released in 2000, it is currently less than half way through the current cycle. But
next year, videogame experts expect the price of the average new game will drop to about $39.99 from $49.99.
(Microsoft Corp.'s X-box, at $199, and Nintendo GameCube, at $149.95, have been out only a year, but the price
points on their games tend to follow those on PlayStation2 games for competitive reasons.)
FROM DIGITAL CAMERAS to Osbourne family action figures, the discount wars already are raging on the
season's hottest products. While Christmas discounts have been creeping earlier for years, this time around some
retailers have a secret weapon driving the deals: new pricing software.
Adapted from the computer programs that airlines use to set ticket prices, the systems analyze customer-buying
patterns to help stores determine when to launch discounts. A small group of the nation's most sophisticated
retailers, including major national chains like Brooks Brothers Inc.; Saks Fifth Avenue, a unit of Saks Inc.; and
Circuit City Stores Inc. are using or testing some form of the software this year.
So far, the new programs have delivered one clear message to retailers: start markdowns earlier. Brooks Brothers,
which has traditionally shied away from early discounting, already has launched promotions on its line of merino
wool sweaters. At J.C. Penney, gift items ranging from Holiday Barbie to motor scooters were recently put on
clearance. Saks is selling Badgley Mischka beaded pants for $1,515, a thousand dollars off the full price. All of the