Are furniture store discounts real?

Are the big 40%, 50%, and 60% off furniture store discounts real bargains?

Are these items being marked down from prices they’ve actually been sold at?

Or is it all just a big scam?

Answer:

Furniture store discounts are exaggerated.

Over my 45 years in the furniture industry, I worked 8 years as a buyer for a major furniture retail chain.

I negotiated costs with factories, established retail pricing in the showroom, chose merchandise for Special sales, and set Sale prices.

I also spent one year managing a Macy’s furniture department.

The crossed-out “MSRP” or “comparative value” prices are fictitious.

Furniture stores very rarely sell at the high price marked on the price ticket.

At one time, some furniture stores justified the high price as a “deluxe” price that included special delivery service or other options.

Eventually, the “deluxe pricing” option disappeared, but the high deluxe price remained on the tags as a “comparative” price.

Most furniture stores limit the amount of exaggeration used for comparative prices.

Everyday showroom price tags, showing a 20% discount from “regular” prices, are considered reasonable.

Consumer protection agencies routinely accept this amount of marketing exaggeration.

Furniture stores very rarely sell furniture below the cost they originally paid.

This includes “Liquidation” and “Going Out of Business” Sales, which often advertise discounts up to 80% off.

The few exceptions include old floor samples and damaged pieces.

Advertised furniture prices claiming discounts of 40% off or more are common.

The store is making almost as much profit (price markup) on these Special Sale items as they are on non-sale items.

Macy’s provides an example of what happens when a retailer gets caught advertising blatantly high “comparative” prices over a long time period.

The company’s website currently includes an explicit pricing disclaimer for each listed item.

For example:

Macy’s Radley 5 piece sectional sofa, Sale priced at $2499 appears to have a 40% discount (and a $1726 Savings) from a crossed out price of  $4225. [The link to this ad no longer works.]

But, if you look next to the crossed out price, there is a little link labeled “Details.”

If you click on the Details link, this takes you to another page with a link labeled, “Pricing policy.” It also states, “Savings Based On Offering Prices, Not Actual Sales.”

Now click on the “Pricing Policy” link.

This takes you to a page, which discloses:

Pricing Policy

Regular and Original prices are our own offering prices. That means we offered the merchandise in our stores or on macys.com at those prices, though we may not have sold items at that price.

So, the savings we show from these prices may not be based on actual sales of the items at the higher price.

Its been standard procedure in furniture store ads for over 60 years.

More recently, it has been widely used in ecommerce as well.

But some retailers use it far more aggressively than others.

Here is an example from the Memorial Day Sale in 2023.

A small retailer, Darvin’s Furniture & Mattress advertised a Bassett leather reclining sofa at a Sale Price of $2999.

Darvin’s “comparative value” price was listed as $7299,  and the ad stated the sofa was being offered at 60% Off.

I looked at 6 other retailers advertising this same Bassett leather reclining sofa during the Memorial Day holiday weekend.

All 6 retailers were selling the sofa at different Sale prices, and all of them had different comparative values.

Darvin’s $7299 “regular price” comparison was the highest by several thousand dollars. The $2999 advertised price was in the middle. 60% off was the highest discount listed.

Nobody else claimed to be selling at a discount of more than 50% off.

The store with the lowest Sale price, Nebraska Furniture Mart, advertised the sofa at $2299, with a Suggested Retail Price of $4500, a 45% discount.

The reader who first contacted me about Darvin’s 60% off Sale pricing  was initially upset at Bassett, the furniture’s manufacturer.

He thought Bassett was responsible for establishing the “regular” or “comparative” pricing of its furniture.

Bassett had absolutely nothing to do with establishing the “Regular prices” listed. That is completely controlled by the retailers.

I was employed for 8 years as a Buyer for a Top 50 furniture store chain in the 1970s and 1980s.

Rules regarding “suggested retail prices” or “comparative prices” or “regular prices” are usually quite loose, since each state and local government has its own regulations, and may choose to enforce them strictly or loosely.

Furniture ads never promote furniture at prices below cost.

No matter how big the furniture store discount may seem to customers, furniture is very rarely sold for a loss.

Large retailers have the power position when negotiating prices with manufacturers.

Smaller furniture retailers usually buy some or all of their furniture through wholesalers or ‘Buying groups.”

Buying groups are organizations that select products and negotiate prices, so they can provide the same purchasing power as large retail chains on behalf of hundreds or thousands of small and mid-size members.

Large retailers (and buying groups and wholesalers) have tremendous leverage when negotiating prices with furniture manufacturers.

Retailers want to pay as little as possible.

But they don’t want to put their suppliers out of business!

That’s what would happen if Buyers tried to squeeze the lowest possible price out of a manufacturer on every item.

Buyers know they can afford to pay higher prices on slow selling items, as long as they can get the best sellers at lower than normal prices.

Overpriced items get ordered in small quantities.

Meanwhile, dozens or hundreds of Sale merchandise pieces may be ordered for each store.

The manufacturer will be OK making little or no profit on these Big Sale items if he can make a reasonable profit on other items being purchased.

The following example will assume a large store is negotiating prices on 10 recliner models from a supplier.

The initial purchase order may be for hundreds (or thousands) of some models.

Our Store Buyer chooses 10 different recliner models.

7 of these models will not be featured in advertising for Big Sales events.

 The Buyer agrees to pay the supplier’s asking price (or close to it) for 7 of the 10 models.

These 7 models are not destined for deep discounts, but they will get tags in the showroom showing a 20% discount from the “regular price.”

[For this example, we will assume that the “everyday selling price” is double the furniture’s cost.]

A “non-sale” recliner purchased for $500 will receive a price tag that reads, “Regular price $1199. Sale price: $999.”

The store may choose to put this recliner model on Sale occasionally at $899.

In that case, the recliner would appear to be 25% off on the price tag, although the real discount (to the store) is only 10%.

Big Sales event models are priced differently.

The 3 remaining recliner models will be advertised with deep discounts.

When negotiating price with the manufacturer, the store buyer has specific price points that he wants to hit when the items go on Sale.

For example, the store buyer might want these 3 recliners to be advertised at $799, $899, and $999.

Showroom price tags are calculated differently for items purchased for “Deep discount” Sales events.

For example, the recliner that is going to be advertised at $899 was purchased from the supplier at a total cost of $500.

Since the price was negotiated down, it should be better than a non-sale recliner purchased at the same price.

At a normal markup, this recliner, bought for $500 would receive a price tag reading, “Regular price: $1199 Sale price: $999.”

Instead, it receives an “everyday price” tag reading, “Regular price: $1499 Sale price: $1299.”

This recliner may actually sell to some customers at $1299.

It will never sell at $1499, but the retailer can usually justify the higher price if it’s not too outrageous, and compares with similar pieces sold at competitors with higher price markups.

The store announces a “Holiday Sale” and places a Sale Tag of $899 over the original “Regular price: $1499 Sale price: $1299.” price tag.

The sofa is now advertised to the public at 40% off.

From the store’s perspective, the price has been lowered only 10% from the price it would normally sell at based on its $500 cost.

Occasionally, retailers buy the remaining stock of bankrupt brands at deeply discounted prices.

When that happens (as it did recently when the Bump bought 200 truckloads of Mitchell Gold furniture) discounts of 40% off or more can be completely genuine.

Furniture stores are usually happy if they can maintain a gross profit margin over 40%.

Explaining the precise meaning of “gross margin” to the general public can be difficult.

A 40% gross profit margin does not mean a piece of furniture was bought for $100 and sold for $140.

Gross margin is calculated on a logarithmic scale.

If a furniture store buys a piece of furniture at $40 and sells it for $80, that’s a 50% gross margin profit.

Buying a piece of furniture for $40 and selling it for $70 results in a 40% gross margin.

The most profitable furniture stores are able to maintain a gross profit margin of over 40%, including markdowns taken for clearance, damaged items, shrinkage (stolen or missing), etc.

Some furniture stores sell at lower profit margins.

These are often the stores with the best values.

Costco and IKEA are the two biggest retailers following the low profit margin philosophy.

These stores very rarely have deep discounts of 40% off or more.

Stores that routinely offer large discounts will have higher profit margins on the furniture they sell, including the items on Sale at deep discounts.

Some furniture sellers are known for having higher than average profit margins. Many of these are “designer” oriented, offering collections by well known designers.

Restoration Hardware and Ethan Allen are two examples. DWR is a designer-oriented online retailer that also works with higher profit margins.

Department stores routinely had higher prices on the furniture they sold. Most of the big furniture selling department stores are now gone. Macy’s is the largest still remaining.

Online retailers usually work on the same general profit margins as brick and mortar stores.

Big discounts at online retailers are often even more exaggerated than for brick and mortar stores.

There is very little oversight into how “comparative” prices are generated. (Comparative prices are the crossed-out prices from which discounts are calculated.)

Any time you see a 60% off Sale, it is safe to assume the retailer is simply playing with made-up numbers.

If the company is large enough, and enough customers complain, the FTC may eventually take action (like they did against Macy’s.) But most of the furniture sellers promoting these fictitious discounts are too small for anyone to bother with.

Mattress dealers are especially prone to advertising huge discounts of 50% or more.

Mattresses are a special case. Each major retailer gets its own special models, making comparisons with competitors almost impossible.

My article, Comparing Mattresses: Are 50% off Discounts Really Bargains? demonstrates that 50% off mattress sales are completely phony.

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If you like my Insider’s Guide To Furniture please encourage your friends and family to check it out.

My 45 years in the furniture industry have provided me with a detailed knowledge of furniture brands, construction, quality & value.

Over the past decade, I have written over 2,000 articles, reviews, and answers, seen by over 2 million viewers.

If any company or individual feels that the information on this website is out-of-date or inaccurate, please let me know and it will be promptly corrected.