Is Kohl’s “Pricing for Idiots” Scheme a Crime?

Wednesday, June 19, 2013
Posted in category Economics

Twice in the recent past I have written about the pricing strategy of J.C. Penney and its attempt to shirk the ‘pricing for idiots’ strategy. First, I wrote about how a new CEO, Ron Johnson, chucked the old strategy of deceptive sales pricing and moved toward a model of ‘true value’ pricing. Shortly thereafter, I wrote that Johnson was fired because this strategy failed to appeal to the catatonic masses who insist on being deceived with deceptive pricing strategies. Not that any of that was surprising.

In my first post, I even noted that Kohl’s had the worst deceptive pricing practice on the planet. Back in 2010, a lawsuit was brought against Kohl’s for its price promotions, or “false advertising,” on the part of an ignorant shopper who apparently saw an opportunity to cash in on his ignorance. This blockhead blamed Kohl’s for his excessive purchases.

In the ongoing case in California, Antonio S. Hinojos of West Covina claims that those types of purported savings led him to buy more than $500 worth of luggage, shirts and shorts at a Kohl’s Department Store in suburban Los Angeles in May 2010. In fact, Hinojos alleged, the prices of the items had not been reduced as much as Kohl’s had advertised.

The case was dismissed in 2010 by a U.S. District Court. Last month, the 9th Circuit Court of Appeals reversed the decision, which will allow the wayward spender and his lawyers an opportunity to pursue a class-action claim.

“Price advertisements matter,” Judge Stephen Reinhardt wrote for a three-judge panel. “When a consumer purchases merchandise on the basis of false price information and when the consumer alleges that he would not have made the purchase but for the misrepresentation, he has standing to sue.”

Shoppers chasing deceiving markdowns is, in part, due to the fact that the cheap-and-easy credit era helped to fuel this ignorance because the abuse of credit has been justified by folks who believe that there is an upside to all the debt: they are buying value because goods appear to be listed at bargain prices. In reality, they are overpaying for products and getting sucked into buying things they didn’t plan on buying, and the end result is more stuff, more debt, and a skewed perception of value. Thus the retail marketing folks adjust to the current political-monetary environment and market to the perception of the times.

If consumers perceive they have wealth (debt + stuff = wealth in the bubble era) and that markdowns are bargains, they will spend in order to increase their perceived wealth. Additionally, inflation and artificially low interest rates increase time preferences, thereby feeding the modern culture of instant gratification. Marketing folks are only doing what they have to do to survive in an era of government intervention leading to bubbles, booms, busts, and malinvestments.

Appellate Judge Stephen Reinhardt, who wrote the opinion reversing the decision, stated that a product’s “normal price is significant in the same way a false product label would be.”

But what exactly is a “normal price,” and how is it the same as a false product label, which is akin to fraud? Who can determine what any price should be for any product, knowing that price is subjective to the individual engaging the transaction? There is no objective unit of measurement because prices of goods are subjective to each individual based on his assessment of goods, the value of those goods, and his subjective taste. The fact that the establishment recognizes “normal prices” points to the belief that goods in the marketplace have a value that can be objectively defined and applied to each individual by authoritative measures.

Kohl’s pricing strategy is inane, and the catatonic masses will bite on it. But the strategy aligns with the current times and perceptions, and no one can blame a for-profit business for pursuing profits based on its leaders’ knowledge of the best way to conduct business within the current economic environment. But inane is not criminal, and the scheme can easily be ignored and rejected by savvy consumers whose subjective valuation tells them that a $30 rug marked up to $60 with a “half off” price tag is no markdown. But then again, the buyers of that $30 rug have determined that the rug is more valuable to them than the $30. So where is the “normal,” and where is the crime?

If there’s a crime of perception, the crime is committed by the government-bankster-financial-industrial complex that has defrauded consumers, investors, and entrepreneurs with its sleazy monetary policy and corrupt financial system.

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6 Responses to Is Kohl’s “Pricing for Idiots” Scheme a Crime?

  1. justin says:

    June 20th, 2013 at 8:26 am

    So, these people who buy hidden marked up pricing are limiting the shopping options (or places to shop at) for people who do see the real value of products.  They’re, also, contributing to their own demise of buying higher priced items and prolonging the false mark downs.  

  2. Mark says:

    June 20th, 2013 at 11:23 am

    I hate all these sales gimmicks. I hate the fake discounts. I also hate the “buy one, get one free” gimmick. The price of the first one is just raised to cover the second free one. I especially hate it when the retailer wants you to have a card to get the discount. I don’t want to walk around with fifty cards in my wallet for every retailer I go to. I don’t want to have to search through my wallet and find the right card to pull out when I go into the store. Just give me low prices.

  3. Pam Maltzman says:

    June 21st, 2013 at 9:51 am

    Heh… I have never shopped in a Kohl’s that I can remember. But I am a Wal-Martian in good standing. We just moved from Lancaster, California to Kingman, Arizona. We do have a Beall’s Department Store outlet, which I must check out…

  4. Melody Nye says:

    June 24th, 2013 at 3:41 pm

    This is so topical. My Corporate collagues were so excited last week that they ‘saved’ more than they spent + got Kohls bucks. So many things are finite, cash is one of them. Though shopping at resale, 2nd hand or Goodwill doesn’t always make me the trendiest dresser at least I find things that are far closer to fair market pricing.

  5. jeannie queenie says:

    June 28th, 2013 at 11:58 pm

    You can knock Kohl’s all you want, but when those summer sales happen, I find the best all cotton shirts marked down to a couple bucks each…have quite a collection now..and what’s not to like about 80% off original prices. I can’t buy the fabric to sew them for that price! Best of all..they are pure cotton, no poly!

  6. cousin lucky says:

    June 30th, 2013 at 11:18 pm

    I was recently at a Sears store to see if they had any towels on sale. I brought 2 towels to the counter and the female clerk wouldn’t ring them up unless i applied for a Sears credit card which I insisted I did not want. I had to wait 35 minutes for a manager to walk by to buy the towels. It’s amazing what banks and corporations think that they are going to get away with nowadays!!

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