Thursday, July 21, 2011

50% discount! ... not ...

Hey there,

I dropped my mum off at the airport in Sydney this morning then immediately drove back to hospital in Newcastle. Made it half an hour late but oh well. A few days ago, we were up in the blue mountains and this is what we saw...

A whole lot of fog.
 However, we were also lucky enough to see this.
And another thing that caught my eye was this.

50% discount. Permanently printed on the signboard. I’ve seen “discount” shops like this around Sydney as well.

My question is that if it is forever 50% discount, can it be considered a discount? Most shops just mark up the price by 50% then give you a 50% discount so that consumers get the perception that it is a bargain when in actual fact it is just normal price.

Once in Malaysia, there was a departmental store that had a promotion; for 10 minutes, you get an additional 20% for anything you can grab and pay for. Sounds good right? But if you visit the same departmental store in a different suburb, everything is marked down an additional 20% for the entire sale period. So in that 10 minute spending spree, they effectively got people to purchase things impulsively without hurting their margins. Clever.

This whole discount thing then brings me to another thing. Stimulus packages. To a certain extent, they help but if not careful, they can cause horrible horrible inflation. Think about it, if you give everybody 1000 dollars to buy a car, everybody is suddenly 1000 dollars richer and the car salesman knows that he can now charge you 1000 more for a car. If not 1000 dollars at least a few hundred dollars.

I know there are many different ways that stimulus packages are designed but what do you think about them? Do help boost a slow economy? Do they work? Or do they just cause inflation and do absolutely nothing for the economy. Do drop me comments or emails I look forward to reading them!

3 comments:

  1. That's a terribly vague topic to come to a conclusion on dude.

    Consider the consumers marginal propensity to consume, with regards to the current western european countries - greece, spain, italy etc. assuming they've got a 0.5..

    the stimulus would then serve to boost the economy as well as investment considering they save 0.5, allowing for further production increases in the future,

    However you've got Friedman's Permanent Income Hypothesis, knowing that this stimulus is temporary, followed by curbed government spending and a tight fiscal policy, meaning increased taxes, the rational consumer is not really going to do too much with his cash.

    But conclusively the stimulus is to sustain their debt thresholds more than boost economies (assuming europe) but if you are referring the US of A, then take a look at Bush Senior's attempt at stimulus. 50% of them increased consumption while the rest foreseeing increased taxes just saved the shit out of their tax exemptions.

    The results of these can never really be foretold but more so come with the gift of hindsight.

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  2. They do the same thing at the Vic markets. They have hawkers yelling out "half price", "50% off" and their product is twice as expensive as next door.

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  3. @Akash thanks for your comment bro, loved the way you put it.


    Plus I have to thank another reader for pointing out a stupid mistake I made. You have to mark up something by 100% to give people a 50% discount to maintain your margin.

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