Spend Management in the Home: Bargaining at Home Depot and Beyond

John Campi would be proud. I'm sure that Home Depot's smooth talking former CPO, who is now attempting to turn around a venerable automotive OEMs' procurement, would chuckle if he read that customers are now successfully negotiating prices down in his former store (although it's unlikely that they're tossing kick-backs to the friendly orange-apron clad service clerks like some in his old procurement organization did). But I digress. For anyone interested in bringing Spend Management lessons in to the home, this New York Times story is a great place to start.

According to the authors, "shoppers are discovering an upside to the down economy. They are getting price breaks by reviving an age-old retail strategy: haggling." But what's fascinating is that these price breaks are not coming from stores (e.g., Circuit City) where it's long been known you can tell a clerk that his prices are killing your first born whom you can't afford to feed unless he gives you 20% off on the 90 inch television staring you in the eye. No, now it's possible to haggle in lots of retail environments, including Best Buy, the Polo Outlet Store and Home Depot as well. I doubt, however, that the actual rules on bargaining that the stores enforce as "informal" as the article suggests.

At Best Buy, one salesman is quoted in the article as noting that "one-quarter of customers tried to bargain ... [and] much of the time, he said, he was able to oblige them, particularly in circumstances where a customer buying electronics (like a camera) also bought an accessory (like a camera bag) with a higher markup. He said the cash registers at Best Buy were set up so that prices could be reset at checkout." But what really surprised me in the piece is the fact that Home Depot is now haggling as well. A company spokesman in the piece notes that "by allowing salespeople and store managers to make some pricing decisions, the company was creating a friendly environment that feels more like a local store than a monolithic corporate superstore. (She declined to say how much leeway individual salespeople or managers have.)"

So what's the net of the situation? If you're at a Big Box store and you're purchasing an electronics or related moderate to big ticket item ($>$100) it can certainly pay to ask the sales clerk to sharpen their pencil (coming prepared with facts and benchmarks is the best way to do this). After all, the worst they can do is say no. But for any large consumer purchases, I still content that a fax round of bidding (which gives retailers the chance to respond to market feedback) is the best way to go. This also can cut out the retail floor entirely, which would usually reduce the profit margin that a retailer makes on any given item through the paying out of commissions to the sales team.

- Jason Busch

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