'Fake discounts' – the latest shopping challenge

Photo (c) Luis Alvarez - Getty Images

One pricing guru says only one in every 1,000 of these discounts is for real

When is “50% off” not really 50% off? Evidently, a lot.

Thanks to the “fake discounts,” some sellers may be setting themselves up for a quick sale. However the truth is starting to come out that companies may inflate the original prices of their products, and then offer consumers discounts that were not as significant as advertised. These sellers could be setting themselves up for some serious blowback. 

Kohl’s and Hobby Lobby were among the first sued for using the tactic, but others – despite the Federal Trade Commission (FTC) and the State of California having laws against the practice – have adopted the same advertising model and those class action lawsuits continue.

Recently, Dovel & Luner LLP filed suits against Emma Mattress Inc., Brooklyn Bedding LLC, the Shade Store, and RugsUSA for allegedly using fake discounts to drive greater sales of their mattresses and bedding products. 

“Advertised ‘sale’ prices are important to consumers,” the lawsuit against Emma Mattress claims. “Consumers are more likely to purchase an item if they know that they are getting a good deal. Further, if consumers think that a sale will end soon, they are likely to buy now rather than wait, comparison shop, and buy something else.”

"In recent years, it has become popular for companies to offer percent-off discounts on everything sold on their online store (for example, ‘20% off sitewide’)” said Christin Cho, a partner at Dovel & Luner.

“These sales are advertised as ‘limited time’ and ‘ending soon,’ but in reality, they are always available. Advertising in this way is deceptive and violates the consumer protection statutes of California and other states with strong consumer protection laws,” she added.

“But because they boost sales and allow sellers to charge higher prices, they remain very popular. Consumers who think they may have been victimized by a fake sale may contact a lawyer.”

The strategies fake discounters use

Breaking this ruse down, Melissa Cid, consumer savings expert and site manager for MySavings.com says there are three fake discount methods companies or third-party sellers use:

Mark it up to Mark it Down: “Stores will raise the price a few weeks before putting it ‘on sale’ to make the illusion that it is a good deal to consumers,” she told ConsumerAffairs.

Percent Off Without Original Price: An item might be advertised as 75% off, but without knowing the original price, consumers can't determine the actual savings.

Buy One Get One (BOGO) Offers: A store might raise the price of one item to cover the cost of the "free" item. Todd Stearn, founder and CEO of TheMoneyManual.com agrees.

“One of the biggest scams is the 50% BOGO, buy one, get one 50% off deal. At first, this may seem like a steal, but sometimes companies artificially increase prices ahead of time. In this case, you might end up paying more than you think for a ‘deal,’” he told ConsumerAffairs.

Black Friday warning

Yes, Black Friday is months away, but you need to be ready because fake discounters will be ready for you.

“One of the most common examples of a fake discount are those offered during Black Friday on doorbusters that were made specifically for the sales event,” money-saving guru Andrea Woroch told ConsumerAffairs. 

“These products may look like a model that was sold all year but could be missing key components or features, allowing the manufacturer to cut the price. We may also see this item marked on sale with an original selling price. But since this [product] was never sold before, it's misleading.”

Outsmarting the fake discounters

In discussing this issue with retail and pricing experts, the bottom line that ConsumerAffairs came away with is “buyer beware” – but that simply by educating yourself about the game, you can spot a fake discount. Not necessarily from a mile away, but enough to keep yourself from feeling like you were duped.

Stean says that he uses three online tools: 

CamelCamelCamel: A browser extension (Chrome, Safari, et al) for Amazon shoppers that claims it can give a person immediate insight into a product's pricing trends, and the ability to sign up for price drop alerts.

Honey and Rakuten: “For those with less than great memories, install an online price tracking tool to do the work for you,” Stearn told ConsumerAffairs.

“Honey helps you see if things are historically low, high or average, helping you decide if now or later is a good time to buy. Rakuten helps me get discounts on things I do want to buy, bringing the price down to something reasonable or even deal-level.”

If you’re not into widgets and extensions, then the old-fashioned homework pen and paper route will work just as well. To do that, Cid says there are two essentials:

Do Your Research: Compare prices across different retailers or websites to ensure that the discounted price is genuinely lower. Familiarizing yourself with the regular prices of products you’re interested in will help you spot a fake discount.

Track Prices: Keep track of prices for items you're interested in over time. This will help you identify whether a sale is genuinely offering a lower price. Use price-tracking browser extension tools or websites to check the historical prices of products to help you determine if the sale price is truly a discount.

Need just a simpler fake discount detector? Here are two…

At the end of the day, common sense will keep you from being tricked by a fake discount, says Mark Stiving, chief pricing educator, Impact Pricing LLC. “Maybe, one out of 1000 of these huge discounts turns out to be a great deal. If you need a rule of thumb, don't buy something discounted more than 50% unless it’s from a reputable retailer you know well,” he suggests.

Woroch advises shoppers to do the math to determine the actual percent savings.

"Stores know people see more value in a bigger dollar savings," she said. "In the end, the $10 off $50 and $20 off $100 is the same percent savings so don't spend more because you think it's a better value. Buy what you need only!”

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