Price Haggling at Circuit City and Best Buy?

I listen to the Grandy and Andy show every morning before work. Every morning they propose a question to their audience, usually about something involving current events or pop culture. Lately their questions have centered around our economy, and needless to say their commentary is amusing. I've commented on their show before, so I won't go into detail again.

Despite my good-natured ribbing of the show's co-hosts, they remain my first source of information in the morning. And sometimes--sometimes--they break stories that can be interesting and inspire me to do further research once I get to work.

This morning Grandy and Andy were talking about Circuit City and Best Buy's implicit endorsement of haggling over the prices of their merchandise. Granted, the conversation was couched in the context of "helping to jump start the economy by increasing consumption" but the topic was interesting nonetheless. Apparently, salesman have long adhered to a somewhat loose pricing policy in order to finalize a sale...but have only recently gone public with their policy.

I think price haggling is a lost art. In some cultures it is considered an insult not to argue over the prices of merchandise, while in other places prices are never listed in order to induce dialog between customer and merchant. While there is no guarantee that price haggling ensures a lower price (indeed, I've been ripped off a time or twelve) it does help ensure better informed consumers, as the Gizmodo article points out.

Andy Parks, the Cro-Magnon co-host of the Grandy & Andy show, chimed in with his usual monosyllabic rhetoric attacking Best Buy's and Circuit City's policies. His rebuttal went something like this, "I'm a man. I don't want every store to turn in to a used car lot. When I go in to a store, I know what I want, I go in and find it, take it off the shelf, pay for it, and leave. That's it. I don't want talk to the salesperson if I can avoid it." A short while later Parks added that he thinks he will be "ripped off" because he'll have to pay higher prices to make up for the lower prices paid by price haggling consumers.

Of course, Parks has it completely wrong. There's no such thing as "make up pricing" as Parks alludes to, and any higher prices paid are the result of uninformed (or, in Parks' case, downright lazy) consumers unwilling to negotiate prices. Price negotiation is ultimately the consumers responsibility, but Parks misses the larger point: whenever a sale is made, there is a mutually beneficial agreement made between merchant and consumer that each party values the other's property more than their own property. In other words, the customer values the merchandise more than the money in his wallet; likewise, the merchant values the consumer's money more than the merchandise on the shelf. If either of the above conditions is not met, a sale is not made. Therefore, the "higher" price paid by Parks is a myth. No one is forcing him to purchase particular goods, and if the price were too high Parks always has the option of not purchasing the good in the first place.

Surprisingly, most callers agreed with Parks during the caller segment of the show. Most used the same reasoning as Parks, lamenting the fact that they would be forced to pay higher prices as a result of other customers negotiating with salespeople. Some callers even hinted at getting the government involved to ensure price stability, which of course will make matters worse.

What's frightening is the prospect of the majority of consumers adopting an Andy Parks-like mentality when it comes to price haggling. But alas, all is not lost. For the bashful consumer, online price comparison sites such as dealnews.com, Amazon, etc. will compare prices for you, even guarantee the lowest price in some cases. Best Buy and Circuit City are merely reacting to market forces and adjusting their sales approach to better serve consumers. And when stores compete for consumer dollars, prices fall...and consumers win.