Retail Ripoff Tactics

Think you’ve seen every retail ripoff? Think again. Here are 8 common tactics used by retailers and car dealers to separate you from your hard earned dollars. Read these and be prepared for the next time!

Used Car Salesman1. Warranty scare tactics. An extended warranty may or may not be a good idea depending on the product purchased, it’s history, the planned usage, and the original price paid for it. Extended warranties are cash cows for the companies that sell them and are one of the top retail ripoffs. The Washington Post says that only 20% of the money spent on extended warranties ever goes to pay claims. Even if a product does break, the cost to repair or replace it is usually not much more than the warranty cost.

When I was a District Sales Manager for a very large billion dollar company, these warranty or protection agreement plans were pushed from the corporate office on a daily, sometimes HOURLY basis with reporting coming down in emails, phone calls, and text messages constantly. If the stores I was responsible for were not pushing these warranties, I was in big trouble. We had weekly and sometimes even DAILY conference calls on our store’s performance and I was expected to train and drive the numbers on these extended warranties.

Here are the facts: when you buy the warranty or protection plan from the retailer, they buy the warranty in bulk from a service provider … at half what you paid. That’s right, the actual cost of the warranty plan is 50% of what’s advertised. Bear in mind that the service provider is still making a profit too — even after accounting for the occasional breakdown or need for replacement!

Don’t let them divide the price into daily, weekly, or monthly numbers either. David Bach showed us that you can retire on just what a cup of coffee costs per day in his book, The Latte Factor. Fund your own retirement and avoid these warranty scams.

Your keys to defeating this tactic: First, deposit the amount that the warranty would cost into your emergency fund. Over the course of time, you’ll have your own “self insured” warranty protection for almost every item you buy. Second, do some intensive research on what you’re buying. Know the actual cost of repairs, and if you can perform any of them yourself.

2. I think we have one left in the warehouse (or on the lot). This one plays on your fears of missing out on a great deal. You want that ONE. Truth is, there is usually 12 or 15 left in the warehouse and the salesperson was trying to play you like a banjo. We’re naturally afraid of limiting our choices and regretting it. Salespeople know this and play on those fears.

Your key to defeating this tactic: Ask several different people how many they have in their warehouse. If you can get the model number, call a competitor in front of your salesperson, asking how many they have in their warehouse and if they match prices.

3. Wear them down. This retail ripoff is commonly used when you’re making a very large purchase and the sales person puts you in a little room, avoiding you for 30 minutes at a time. He claims to be working on getting you a better deal, but in reality he’s in the employee lounge drinking horrible coffee and watching Oprah arm wrestle Dr. Phil. He and his sales manager are just trying to get you to say yes to their terms so you can finally get outta there. Watch for this tactic in car dealerships in particular to insure you don’t “get taken for a ride.”

Your key to defeating this tactic: Arrive late in the day … or on a rainy, dreary day. If you do get there early, have the courage and the willingness to walk away. Force the time issue on the front end. My father in law used to buy a car by telling the little sales guy, “I don’t have time for this. I have three other dealerships I’m visiting today and they have a better selection than you and probably better prices. Do You Want My Business OR NOT?”

4. I didn’t add this up right. Some salespeople will quote you an estimated price and promise to “work out the details later.” What they’re really trying to do is to get you to fall in love with the product at a certain price range. Later, when the true price is computed and it’s significantly higher, the sales person will compare the new price to the old price. With a car he might say, your total “investment” will be only $1,200 more than the original number. Isn’t it worth it to have what you really want for only $1,200? Other variations of this ripoff include: the printer wasn’t aligned, my calculator was broken, I didn’t know you wanted THAT option.

Your key to defeating this tactic: Answer no. It’s not worth it. Have the willingness to walk away from any deal that doesn’t go your way. It is YOUR money. Other people want it, but you only have to give it to them when you feel you are getting the best deal. This willingness is your most powerful weapon. Use it!

5. Bait and switch. This is one of the oldest ripoffs in the book. Retailers will advertise an incredibly low price on a high demand item to drive traffic into the store. But once you’re there…no product remains. So, since you’re already there, the sales person shows you the next step up in quality. Conveniently, it cost quite a great deal more as well. To be fair, some retailers DO run out. Honest ones will allow you to purchase the product at the sale price until more arrives. Variations include: low balling you on the phone or over the Internet to get you into the store.

Your key to defeating this tactic: Ask for a rain check. Ask to pre-purchase the product. Take the advertising flyer to competitors and make them match the price. Do not take no for an answer. Ask to speak with the District Manager, the Regional Manager, or even someone at their corporate office. Press the issue. Do not let up if you want that product at that price. Bait and switch tactics are illegal and if you use the term, you might be surprised what sill suddenly be made available to you and what “rules” will be ignored.

6. Does paperwork=contract? Many retailers, and car dealers in particular, are fond of referring to their contracts as “the paperwork.” This one isn’t so much a ripoff as a psychological manipulation. Seems that many sales people are frightened of the word contract. They ask you to initial the paperwork here, here, and here. Sign the “offer” right here and “I’ll go talk to my sales manager on your behalf. Wish me luck!” You may have just made your purchase without realizing it. The “three day cooling off period” that allows you to cancel a contract within three days usually applies only to “in home” sales presentations, in most states. Check locally to be sure of the laws that apply in your area. Just remember, if you sign ANYTHING, you could be obligating yourself to buy it.

Your key to defeating this tactic: Refuse to sign anything until you’ve worked out all the details and you are 100 percent ready to buy. If the sales person won’t play your game, again, the willingness to walk away is your best weapon so use it!

7. Yes, yes, yes, yes, yes, yes, yes. Salespeople believe that we’re stupid buffoons. Their training manuals suggest that if they can get the customer saying yes enough, sheer momentum will propel them to buy. What a crock of bologna. Maybe it works on someone who has been sniffing glue, but for the most part, people just aren’t that dumb. Are you interested in a low maintenance home? (who isn’t?). Are you concerned about car safety for your family? (puh-leeze) The flip side of this tactic is the obvious NO answer. Do you currently have a burglar alarm? No? No? You don’t have one? (I’m shocked, SHOCKED I tell you). This particular tactic is used to embarrass you into buying the system.

Your key to defeating this tactic: When a sale person uses these tactics, stop them in their tracks and say, “Look, there’s no need to ask me questions that the obvious answer is yes (or no). Just show me the features and benefits of this product/home/car. Does your product not sell itself? Do you not have faith in your product? Do you know how to demonstrate your product to new customers? Turn the tables and watch them squirm.

8. The hand off. When junior can’t seem to handle you, he will turn you over to Guido, his cousin who closes every sale and knows how to cut to the chase and get you to sign. Some stores even require this procedure and it can work very well when trying to sell an extended warranty or protection agreement plan. You might hear the term T.O. which stands for “turn over.” When you see the TO man coming your way to talk to you, get ready. Usually his first question is, “What will it take to get you into that car today?” They he will shut up. You better have an answer or else things will get very uncomfortable very quickly.

Your key to defeating this tactic: know what you want and stand your ground. If you want the vehicle for $15,500, then $15,501 will not do. If you want an interest rate of 7.5% then 7.51% will not do. If you want the extended warranty for free, then paying one red cent for it will not do. So decide what you want before you have to face Guido.

Editors note:
Though I’ve painted a pretty dismal picture of retail and automobile sales people, the fact is that there are many who are trustworthy, honest, dependable, and hardworking, but they aren’t as interesting to write about. This article wasn’t referring to them.