October 13, 2021

Article at WorthPoint

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Retail Price Transparency: Should Buyers Know Your Costs?

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Pricing transparency has overturned the way Antiques and Collectibles dealers do business

Listen to Wayne Jordan read Retail Price Transparency: Should Buyers Know Your Costs?

Retail Prices Used to Be Need-To-Know

In the past twenty years, the antiques business has been turned upside down. A generation ago, antiques businesses were local. Some stores had multiple locations, but few were large enough to have a solid regional presence. The prices charged varied from market to market. Buyers in upscale markets paid more than customers in middle-class neighborhoods for similar items. Customers didn’t know the difference. Dealers controlled the information, so they controlled the way transactions were made.

Specialty retailers of every sort worked hard to protect their pricing information. After all, the only way to sell something was to get a customer into the store. You couldn’t do that by giving prices over the phone.

In that bygone era, buyers gathered price information by shopping store-to-store. They also searched by phone and in catalogs, newspapers, and magazines. It was tedious work. One could spend hours tracking down the best price for an item.

To maintain price secrecy, dealers did two things:

  1. Enacted a zero-tolerance policy regarding employees giving prices over the phone. One could be fired for such a transgression.
  2. Established methods to discover competitors’ pricing strategies.

I Become a Spy

The only way to gather competitive intelligence was to be a spy. A common ruse for discovering a competitors’ prices, discounts, and terms was called “shopping the competition.”

For example, my first job after graduation was as a piano salesman. Piano dealers were offered exclusive territories and could price products as they wished. As part of my training, I was asked to team up with a female colleague and, pretending to be a couple, shop for a piano at competitors’ stores. Our orders were to inspect the inventory in each showroom and note the retail prices. We were then to pick a model, negotiate a discount, discover shipping costs, and explore financing options. We would then thank the salesman, offer spurious contact information, and move on to the next showroom.

Sleazy? You bet. But that’s how it was done. Prices and discounts were proprietary. They were closely guarded secrets.

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Retail Price Transparency Is the New Normal

These days, we have pricing transparency. Prices are not hidden from consumers. They are as accessible as your smartphone. Online pricing and research databases and eCommerce sites are commonplace. Feature comparisons are easy. Product and company reviews are available. The paradigm has shifted: it is now possible for consumers to know more about an item than many antiques and collectibles dealers.

Consumers Are Pushing for Cost Transparency

Apparently, though, it is not enough that consumers want comparative prices and features. They also want to know how much a dealer’s cost is for a product and how they spend their profits. This issue is especially egregious in the food and fashion industries.

Consider this enticing tidbit from the Fashion Transparency Index 2021, which states:

“250 of the world’s largest fashion brands and retailers were reviewed and ranked according to what information they disclose about their social and environmental policies, practices and impacts, in their operations and supply chain.”

In other words, they want to know how much profit a seller makes and what they do with the money.

Here’s Where I Draw the line

Let me be clear: how much I pay for the products I sell is no one’s business but mine. Neither is how I spend the profits I make.

I understand why such information edifies consumers. By spending their money in accordance with their personal values, they feel they are making the world a better place. I get it. As individuals, they “put their money where their mouth is.”

If that’s the case, they should buy more antiques. Antiques align perfectly with the values of millennials and GenX. Antiques are:

  1. Recyclable
  2. Sustainable
  3. Unique
  4. A good investment
  5. In addition—since they aren’t in current production—have zero carbon footprint.

Fortunately, cost transparency hasn’t hit the antiques and collectibles business. Few of the dealers I know would stand for it.

Does Retail Price Transparency Lower Prices?

In theory, yes. As a practical matter, no.

Imagine that consumers knew what everyone charges for a product. Conventional economic theory maintains that competition would cause prices to drop until no seller could make a profit. Rob McMillan, executive V.P. and founder of Silicon Valley Bank, concurs with this view. He says, “I do believe better price information will drive down price.”

I’m going to call “B.S.” on that. Real-world transactions don’t support this view.

We often hear that price transparency creates a “race to the bottom,” price-wise. Perhaps that’s true for consumer goods, but it is not true for the antiques and collectibles business. Consumer goods—mass-produced, identical products—are often distinguished by price alone. Sellers of such products have two choices: they can keep lowering their prices, or they can keep prices stable and compete on value. Value propositions are enhanced by improved customer service, shipping options, selection, product packaging, return policy, and so on.

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Consumers buy based on value, not price. McKinsey & Company, in their presentation Setting Value, Not Price, points out that:

“Customers do not buy solely on low price. They buy according to customer value, that is, the difference between the benefits a company gives customers and the price it charges.”

What transparency has done is eliminate price outliers. Sellers whose prices are too high or too low based on the value offered will lose sales.

Does Pricing Transparency Lower Profit Margins?

No, it does not, because price transparency also benefits us as pickers. Pricing and research databases enable us to buy better, sell right, and maintain our margins.

Even deep into the transparency trend, our margins beat those of most retailers. According to Shopify:

  • Brick-and-mortar retailers tend to have profit margins between .5 and 4.5%.
  • Web-based retailers generally have higher profit margins, while building supply and distribution retailers have the best margins…

The Retail Owners Institute reports that in 2020, pre-tax profits for brick-and-mortar used merchandise stores was 5.7%. Online sellers boast even higher margins.

Antiques and collectibles, unlike consumer goods, are unique. They are distinguished by rarity, condition, provenance, and authenticity. These points of connoisseurship reveal differences even in items of the same make and model. Price is only one aspect of an antique’s value. Most collectors and resellers are smart enough to know that, and they buy and sell accordingly.

Retail price transparency provides actionable data

Ultimately, price and research databases level the playing field between buyers and sellers. They provide actionable data. Information asymmetry (in which dealers control the information) is a thing of the past. Transparent pricing and multichannel retailing combine to force sellers to focus on their value proposition. And that is good for the antiques and collectibles business.

Wayne Jordan is WorthPoint’s Senior Editor. He is the author of four books: The Business of Antiques published by Krause Books, Antique Mall Profits for Dealers and Dabblers, Consignment Gold Rush: the Ultimate Startup Guide and Relocate for Less published by Learning Curve Books. He is a regular contributor to a variety of antiques trade publications. He blogs at sellmoreantiques.net.

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