what would motivate a seller to price its product that will yield to negative contribution margin?

Question

A sporting goods retailer is running a monthly special, with snow skis and snowboards being priced to yield a negative contribution margin. What would motivate a retailer to do this?

this is a break-even analysis.

Answer 1

It could be an inventory issue. The carring costs may be too high or too long. Snowboards are seasonal.

Also, snowboards & skis are only part of the product mix. They may lose money on these items but make money on the other items you purchase while in the store.

Answer 2

Negative Contribution Margin

Answer 3

Summer is here in the USA, and the retail probably knows that those things will sit there and collect dust by the time that winter arrives again. (Don't know which area you ask this in)

Most retailers take their chances and reduce stock preventing it from sitting out on shelves cluttering the way. Sometimes you just need to take a loss and clear out old inventory.

Answer 4

To get the items out of the store to make way for new merch. OR to draw ppl to the store, in hopes that they will buy other things while they are there. Example: accessories that go with the snow skis and snowboards.

Answer 5

Positive pictures and images are more empowering and better suited to motivating changes in behaviour. When people are faced with neative pictures such as are common in media or An Inconvenient Truth they can focus upon the overwhelming scale of the issue and refuse to make changes or even deny the problem all together. By showing positive pictures about what may be achieved people are far, far more likely to be motivated.

Answer 6

Two possibilities:

1. The items are "loss leaders," intended to draw in consumers who will see and purchase other, more lucrative products.

2. This retailer is willing to lose money in order to expand their market share.

Answer 7

They are trying to get the investment back out of the merchandise (the outlay) in order to make room for and invest in new stock....
They may have gotten a good opportunity and need the cash.

Answer 8

Perhaps taking a loss and writing it off on the taxes will allow them to gain more than lose. What I mean is they may be precariously close to reaching a higher tax bracket when it would be to their benefit to remain just below it.

Answer 9

To liquidate inventory.
To increase cash flow.
To get people in the door.

Answer 10

tax breaks for one. many times the markup is so high they can sell low and still cut a profit.