How Sears Plans To Profit From The “Other Guys’” Price Wars!

This was very instructive. As Amazon, Wal Mart, and Target are involved in a price war on books, Sears is thinking outside the box and planning to profit!

On “Best Sellers”, the big boys in the book selling world were slashing prices… first to $10, then as low as $8.99. That means that for key titles, the sales outlet could be making absolutely no profit or perhaps even taking a loss.

Here’s what Sears decided to do: give a purchasers of these books a credit equal to their purchase at these other outlets. So now when they come to shop at Sears Online, they will have a coupon for $8.99 to $10.00 to spend on Sears merchandise selling at it’s normal online price and online profit margins. If Sears’ average order is $50 and their profit is $25 (I’m just making numbers up right now), they can stipulate “Save $9.99 on a minimum $50 purchase”. At the end of the day Sears will

1) Have a new customer email in their database
2) Make many sales they may not otherwise have made, and
3) Still make a profit instead of taking a loss!

Pretty cool eh! While the competition is taking a loss or breaking even and hoping their customers purchase enough other books to make the transaction profitable, Sears is just discounting their ordinary merchandise.

As long as they (or any other retailer) “knows their numbers” they can make this work.

At what point does your average order have the minimum profit you’re willing to accept when offering a discount equal to the competition’s receipt?

Is that $25? $50? $100? As long as you know YOUR Numbers, you can make this work!

The only problem is if that profit point is significantly higher than your average sales ticket. What do you do then? If you’re a restaurant or other retailer and the average ticket is LESS than your competition’s “hot deal”, you can always offer take the receipt’s value off the sale of a gift card or gift certificate!

Whatever your business – even if you’re a small business competing against the “Big Boys” – there is probably a way to use this technique to turn “cost cutting” against them and to your profit.

It’s obvious that if you’re an independent bookseller, you can’t compete selling best sellers for $8.99! But you can compete by offering a the same deal as Sears.

Ask yourself what cost cutting measure it is that your competition is using to drive you crazy… then, following the strategy above, how can you use that to help sell your highly profitable goods and services at a discount to the consumer but still at a livable profit for you and your company?