Retail Strategy Secret #4: PUF

puf

Welcome to the fourth post in our series of “Retail Strategy Secrets”!  Here you will learn the angles, approaches, and tactics retailers are using every day to try and separate you from your hard-earned cash.  Understanding these unlocks the door to spotting great deals, and you never want to pass up a Dealicacy…

PUF

An acronym that stands for “Profit Up Front”, PUF is the act of requesting (or requiring) some payment up front before allowing access to products offered at potentially lower than average prices.  This pre-payment assists with profitability of the retailer, and is implied to make it possible to provide such low prices to the consumer.

PUF came into the mainstream sometime around 1980, and frequently presents itself in the form of paying a fee to becoming a member or buying an annual membership to a given retailer. The concept became entrenched when wholesale and warehouse clubs began to expand across the country.

Now you know somewhat why… you have to present your card upon request when visiting Sam’s, Costco, and the like. A side note: I hate this practice. Isn’t the greeter supposed to make you feel welcome? Like you belong to something great? Instead I get dirty looks for being too slow while juggling kids, grabbing a cart, and fumbling through my wallet at the same time. It’s not like I can buy anything without having to *again* present my card at checkout… Ok, end of rant.

By the way, did you catch the “implied” wording in the definition of PUF above? You got it, your $42 Sam’s Club membership is really just added revenue to the warehouse club. It doesn’t translate to 3 more cents off of cereal, go to bribing Nike to providing exclusive wholesale lots of polo shirts, or anything else. This is all done through the retailer’s negotiating power… the employees with “Buyer” or “Merchant” in their title, not your membership dues. By some counts, PUF operators generate about half of their pre-tax *profits* from these up-front fees.

So where do the other half of the profits come from? You really have to watch yourself while shopping in a wholesale or warehouse club. PUF can be viewed as “EDLP” with a membership fee. In most every Sam’s club I have been in, milk (among other products) usually costs *more* that you will find at any local grocer.  50 cents to $1 per gallon more, in fact. Further, the gimmick is that everything is available “in bulk”, so the temptation is to buy quite a few gallons of milk at these “low prices”. Not a Dealicacy.

There are great deals to be had with PUF pricing, though.  Become a subscriber of Dealicacy’s email newsletter and we’ll walk you through them.  We recently stumbled upon a great technique for saving DOLLARS per pound on high-end meat. The savings add up *really quick* and are quite tasty too… yum.  Plus, they more than pay for that silly membership fee.

So what’s up next in our series? SDD Pricing. See you soon!

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