Month: October 2012

Categories
Marketing

pricing strategies of Forever 21

Models of pricing

cost-plus pricing: ( the cost of producing the product+profit )

Forever 21 cut down the cost by hiring cheap labor and applying cheap design. Many workers in Forever 21 stores are minimum-wage high-school workers. Meanwhile, Forever 21 moves its production to Asia to pay less to workers. Forever 21 has faced more than 50 copyright lawsuit for stealing work of designers, ranging from Anna Sui to smaller independent designers like Trovata. Forever 21 does not spend a lot of employing designers.

Customers can buy goods at a low price in Forever 21, because Forever 21 cut down its cost by applying two methods: cheap labor and cheap design.

Market-oriented pricing: ( if competitors are pricing products at a lower price, Forever 21 should should price its products at a lower price)

The main competitor of Forever 21 is H&M, they both provide affordable prices and latest styles to customers. When H&M manages to provide a lower price to customers, Forever 21 should take some measures to win customers. For instance, Forever 21 can cut down price as well, and provides some deals.

Psychological pricing: ( price designed to have a positive psychological impact ）

Forever 21 often sells its products at $29.95 or $29.99, rather than $30.

references:http://articles.businessinsider.com/2012-02-27/strategy/31103150_1_cheap-labor-child-labor-factories http://en.wikipedia.org/wiki/Pricing_strategies  http://checkwin.com/?place=forever-21

 

Categories
Uncategorized

The Myth of the Black Friday Deal(1)

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Decide inc is a customer-price research firm that gathers and analyzed the data of price changing, they tracks the prices of products ranging from flat-screen television to Barbie dolls each day for at least two years across a number of retailers and e-commerce websites. However, Decide do not track in-store prices, which differ from market to market. As a result, its finding do not reflect the “door buster” specials offered during Black Friday on limited items  found only in stores.

Obviously, the data offered by Decide can give us some information about price change throughout a year, and maybe we can know why Black Friday is not the best day  to shop for price deals.

Decide tells us that prices for some gift items are lowest before holiday and will be increasing with the coming of holiday. For example, the best time to buy UGG is September or October, at this time, the prices are lower than that in December. The average price of  a Samsung 46-inch “Professional” LCD television is around $1159 in October, but $1355 on Black Friday Day.

There are many reasons causing the situations above. The core one is called pricing strategy. Retailers may get a fifth or more sales of a whole year if they can have a good pricing strategy.

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reference: http://online.wsj.com/article/SB10000872396390443615804578042700772445448.html

Categories
Finance

MY PARENTS MADE A STUPID DECISION

Before I came to Canada, my parents bought Guaranteed Investment Certificates (GICs) in Royal Bank of Canada. It is a secure investment that guarantee to preserve your principal, and investors can earn some interest, at either fixed or variable rate, or based on a predetermined formula. This depends on which type of GICs you buy.

My parents bought redeemable-GICs. This type offers investors a fixed rate of return for a specific term, with both principal and interest guaranteed. As I know, RBC will return a part of money once a month. It seems that if people buy GICs, they can easily earn some money by getting the interest. For example, if individuals invest $1000, and the interest rate is 10%, after one year, they can get $1100. However, it is impossible that the interest rates are that high. This is the data about the interest rates RBC provides for GICs investors. Some interest rates are even lower than the inflation rate in BC.

Term
to
Maturity		 For Investments of
$5,000
to
$99,999.99		 $100,000
to
$249,999.99		 $250,000
to
$999,999.99		 $1,000,000
to
$4,999,999.99+
[%] [%] [%] [%]
1 to 29 days n/a(1) 0.300 0.300 0.300
30 to 59 days 0.500 0.600 0.600 0.600
60 to 89 days 0.650 0.750 0.750 0.750
90 to 179 days 0.800 0.900 0.900 0.900
180 to 269 days 0.900 1.000 1.000 1.000
270 to 364 days 0.900 1.000 1.000 1.000
Additionally, if we use some ideas that we learnt in TIME VALUE OF MONEY section, we can know $1000 after one year cannot equal $1000 now, and $1100 after one year may be less valuable than $1000 today. Obviously, it is not a smart idea if you want to earn money by investing GICs, and my parents made a wrong decision. Maybe, they are supposed to take COMM101 before buying GICs.
Reference: http://www.rbcroyalbank.com/products/gic/index.html

 

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