Many people ask themselves how stores can make any money at all if they are doing buy one get one free specials on a weekly basis. In reality, such deals are not detrimental to a company’s bottom line whatsoever. In fact, if anything they contribute to increased sales for a number of reasons. Here's an explanation of why BOGOs are a boon to retailers, especially in this economy.
Stores run sales on a regular basis in order to entice shoppers to buy from them instead of visiting another grocery store or retailer. Sale items are meant to be what bring customers in and, of course, while they are there they will pick up other items that they need that just happen to be at regular price. They often end up doing all or a large portion of their family’s shopping at that one store.
When you take a close look at the buy one get one prices, which are always at the product’s regular full price, often the price per item is close to what the price would be if one individual product were on sale by itself. The buy one get one is simply another form of the same sale meant to bring customers through the door.
In addition, many sales are deemed loss leaders. Many BOGO sales fall into this category. Basically the store is willing to take a loss on certain items that are priced well below their typical selling price because it will be more than made up for by the additional draw it provides to customers who don’t regularly shop there.
The other aspect that makes BOGO sales advantageous to the retailer is the incentives offered by manufacturers. Retailers typically increase their orders of a particular item during weeks when that item is on sale. Increased order volume means that the manufacturer can sell the products to the retailer at a lower cost. This translates into lower cost of goods on BOGO items due to higher turnover than usual.
Even when those exceptionally savvy shoppers match up their coupons and head out to pick up the sales, there is no real harm to the retailer. Even though you are saving a great deal of money and are paying very little out of pocket for the things you are buying, the retailer will be able to recuperate that money. He will submit the manufacturer’s coupons that are redeemed for credit.
BOGOs are not really any different than other sales offered by a retailer. In fact BOGOs encourage you to buy more of a product, at least two items, which is often more than you would buy if you were just getting a regular sale. This increase in turnover is good for the company and good for the consumer.
BOGOS are very advantageous for the retailer because they have the power to draw in more customers than many regular sales. More customers mean more sales and more sales mean more profits for the retailer. BOGOs truly are a win-win situation for both the retailer and the customer.
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