Discount Purchasing Essay, Research Paper

Discount Purchasing

Like any other word or phrase there are different meanings and sayings. With the word discount there are several meanings for just one word. So to start our research project we are going to provide you with a definition describing the different meanings of the word discount. First we will start with the word discount in the commerce sense.

“Discount, in commerce, deduction from the price of a commodity. Discounts are usually made in consideration of payment within a specified time limit. Quantity discounts are given to purchasers or large quantities. Trade discounts are given to wholesalers and other trade groups to cover the cost of performing specific functions, such as warehousing and merchandising.”

There are always two sides to everything so now here is the term discount in a definition in a finance sense.

“In finance, discounts are premiums or considerations given on the purchase of promissory notes, bills of exchange, or other forms of negotiable commercial paper in advance of their maturity dates. Such discounts make up deductions from the face value of the discounted paper and are made at the time of the purchase.”

So what is the real difference between discounts in commerce and discounts in finance? My perception of the two is that discounts in the commerce definition has more to do with the consumer and has nothing to do with the business end of things. The finance definition has more to do with the business end of things; it is associated more with companies doing business with each other rather then with the consumer.

Consequently, what does this mean to the consumer in the long run? In my personal opinion; not to much. This has been going on for years, and has never really posed a problem to consumers before; other then the discount stores are become a thing of the future and are constantly growing. Thus fazing out the smaller supermarkets.

Who are the big guys fazing out the smaller supermarkets, and offering lower prices that have never seen before? Right now there are three major players in this market; Costco Companies Incorporated, Wal-Mart Stores Incorporated and KMart Corporation. In the following pages I will identify what each company has to offer and then I will contrast their ideas.

Before I can do any of the above, I will first have to explain to you what a discount store is and how they evolved.

“Discount stores, in retailing, establishments that sell consumer merchandise mainly on a self-service basis and at the most competitively low margins. The term discount relates to the practice of selling at a percentage off the list price, the basic retail set by the manufacturer.”

Much like any other store or business that is just starting in the world of business starts off small. This holds true for the original discount houses as there where called. Much like today these houses in the early 1930’s where aimed towards a certain market; and this market was given special admission cards. During these times the normal department stores where still there, but since the country was in a recession not very many people wanted to pay a high price for everyday items. So as sales in the United States and Canada declined; many manufacturers had to dispose of there stock. This is how the discount stores got there start. Soon after a law was passed stating that all goods could not be sold under their fair market value. Most commonly known as the fixed price by the manufacturers or retailers. Much to the dismay of the department stores, this law was not strongly enforced.

Meeting the demands of the public, soon after World War II ended many manufacturers filed suits to prevent the mark down or discount of there fixed price items or goods. Most of the discount stores after the war offered limited service or self-serve and operated off of a medium to small profit margin.

In the early 1960’s, franchise discount stores began to take over the discount store market. Discount stores soon became the leading outlet among retailers; forcing stores like supermarkets and drugstores to buy up some of the discount stores taking up there clientele. By the late 1960’s, discount store practices had become accepted among the retailers.

So you have probably been asking yourself who are these discount stores and what do they have to offer me? Well in the next section I will offer a contrast of ideas between the three major discount stores; Wal-Mart Stores Incorporated, Costco Companies Incorporated and KMart Corporation.

I will start first by explaining the Wal-Mart Stores Incorporated company.

Wal-Mart Stores Incorporated is the second oldest discount store sitting behind the KMart Corporation. Wal-Mart unlike many other stores has a variety of stores which they own. If you have ever walked into a Bud’s Discount City store or a Sam’s Club Warehouse you are just walking into yet another Wal-Mart with a different face plate. Wal-Mart stores like Costco and KMart sell a variety of items and merchandise; ranging from household furnishings to clothes and electronics to even gardening and automotive supplies. What I have just described is the standard Wal-Mart format. Next you have what the Wal-Mart Stores Incorporated call the Wal-Mart Supercenters; at these stores they offer as much if not more of the normal merchandise found at the other stores but they add a twist and inside they have a full service supermarket. Like I said above Bud’s Discount City Stores are also department type retailers. They offer close to seventy five percent of that of the Wal-Mart stores, the remaining twenty five percent includes closeout items and refurbished goods.

Last but not least Sam’s Clubs, this branch of the Wal-Mart Corporation deals with membership only entrance and offers greater discounts then the standard Wal-Mart store. Many of the items at this chain of stores and be purchased in bulk and more expensive and larger appliances.

Now just a little history on the Wal-Mart Stores Incorporated and how they became the giants that they have today. Sam Walton in 1945, became one of the store managers at his local Franklin Variety stores in Newport, Arkansas. In 1950 Sam moved to the small town of Bentonville, Arkansas and opened another Franklin Variety Stores and called it the Walton 5 &10.

The same year that Sam Walton opened his new store in Bentonville, Arkansas; he tried to convince the head office to change from offering discounts on only items that didn’t sell to all of the stores items. That same year Sam and his brother Bud decided to open their own store named Wal-Mart Discount City, in Rogers, Arkansas. Operating 18 Wal-Mart Discount Stores now in 1969, they where now just commonly known as Wal-Mart’s. Sam managed to do all of this well still managing 15 Ben Franklin Stores, Sam Walton incorporated.