Question:
Bassett is advertising reclining sofas at 60% off.
The Parker leather reclining sofa pictured above is advertised at
$7299Super Value Price $2999.Is this Sale discount legitimate or is it a scam?
Answer:
The $2999 price may be a decent value, but the $7299 comparative price is wildly inflated.
Bassett is not the company advertising this reclining sofa.
The prices you’re quoting are from a retailer, Darvin’s Furniture & Mattress, an authorized Bassett dealer.
I looked at 6 other retailers selling this same Bassett leather reclining sofa.
The $2999 Sale price was the 2nd best I saw, but $7299 was the highest comparative price by several thousand dollars.
Nebraska Furniture Mart is advertising the same Bassett Parker leather reclining sofa for $2299.
NFM’s “Suggested Retail Price” is $4200, a 45% discount.
Whether you see furniture advertised at discounts of 45% or 60% off, it is safe to assume the furniture is not being sold below cost.
In fact, in most cases, the retailer is still making a substantial profit, even as discounts approach 50% or more.
Memorial Day is a particularly big Sale’s event for furniture, sometimes with better than normal discounts.
With reclining furniture, 30 – 40% Sale discounts are common throughout the year.
Furniture sold at deeply discounted prices is usually highly profitable for the retailer.
Furniture shoppers are constantly guessing at furniture markups and profit margins.
I frequently see wildly inaccurate guesses stated as “fact” in articles and reviews.
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.
Each state and local government has its own regulations, and may choose to enforce them strictly or loosely.
Large national chains are regulated more closely than smaller retailers.
Furniture stores make a substantial profit, even when their furniture is advertised at a deep discount.
That may seem counterintuitive.
But many of the marketing and advertising strategies used by today’s furniture stores are the same as those used 100 years ago.
Large retailers have the power position when negotiating pricing 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 on behalf of hundreds or thousands of small or mid-size members.
This can provide the same purchasing power as large retail chains.
Large retailer (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 usually want to put their suppliers out of business.
How are furniture Sale prices determined?
The following example will assume a large retailer is purchasing 10 reclining sofa styles from a supplier.
The initial purchase order may be for hundreds (or thousands) of each item.
Our large retailer chooses 10 different reclining sofa styles and agrees to pay the supplier’s asking price (or close to it) for 7 of the styles.
These 7 styles will get price tags in the showroom that are approximately double the cost of the items (including shipping.)
For the remaining 3 styles, 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 reclining sofas to be advertised at $799, $899, and $999.
The new reclining sofas arrive at the stores, are placed on the showroom floors, and given price tags.
The 7 styles that are not going on sale get showroom price tags reflecting selling prices that are approximately double their cost.
Frequently, even the items being sold at full mark up will receive price tags that appear to show discounts from higher “suggested retail” or ” compare at” prices.
Those higher prices, which the item is never sold at, are justified because there are other furniture sellers (for example) department stores that sell similar furniture at higher mark-ups.
There are also smaller retailers who pay more for the same products and would theoretically have to charge a higher price if they wanted to get a “full” 100% mark-up.
Price tags showing a 20% discount (approximately) for items that are not “on sale” are typical.
In this example, a “non-sale” reclining sofa purchased for $500 will receive a price tag that reads, “Regular price $1199. Sale price: $999.”
The store may choose to put this item on Sale occasionally at $899.
In that case, the furniture would appear to be 25% off, although the real discount is only 10%.
The 3 reclining sofas purchased specifically to go on sale at deep discounts will receive price tags that are calculated differently.
As an example, let’s look at the reclining sofa that is going to be placed on sale at $899:
This reclining sofa was purchased from the supplier at a total cost of $500.
Since the price was negotiated down, it should be better in some noticeable way than the non-sale reclining sofa purchased at the same price.
At a normal markup, this reclining sofa, purchased for $500 would receive a price tag reading, “Regular price: $1199 Sale price: $999.”
But it actually receives a price tag reading, “Regular price: $1499.”
This reclining sofa may or may not actually sell at $1499 to any of the store’s customers.
That doesn’t matter as long as it was legitimately offered at the $1499 price.
The store may use a price tag reading, “Regular price: $1699 Sale price: $1499, even though it would be difficult to justify the $1699 price.
The store announces a “Holiday Sale” and places a Sale Tag of $899 over the original $1499 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 average sell price.
Since the Pandemic, some retailers have been offering larger discounts than usual.
This is especially true on furniture manufactured in Asia.
During the Pandemic, costs soared for both raw materials and shipping.
For example, prior to the Pandemic (and currently in May 2023) the cost of shipping a 40 ft. container from China or Thailand to the US is approximately $3000.
At the height of the Pandemic, ocean shipping prices jumped as high as $20,000 for the same size container.
Supply shortages and domestic shipping costs also soared.
Many raw materials, including foam and plywood, more than doubled in price.
Making matters worse, furniture sales soared during the Pandemic.
The most popular items quickly ran out of stock in their warehouses with new shipments taking 6 months or more.
In response, many furniture stores ordered extra container loads from their suppliers.
They also raised prices – the biggest price increases on furniture in several decades.
Shipping delays sometimes caused multiple orders to arrive together, overwhelming warehouse capacity.
Many of these arrived after the huge customer demand had begun to subside.
Retailers were stuck with warehouses full of furniture, purchased at far higher costs than if new orders were placed today.
To reduce the excess inventory, retailers have been advertising deeper discounts than usual on heavily overstocked items.
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