Loss leaders are aimed at dumb customers

Many stores offer special deals on “loss leaders” — products that are sold very cheap, often at a loss, in order to entice customers into the store to buy other things that are substantially marked up in price.

One store that doesn’t do this is Costco. Generally speaking, they try to simply keep low margins on everything that they sell; nothing at a loss, but nothing with a huge margin either.

The “Acquired” podcast did a great episode on Costco recently, and the hosts explained loss leaders this way:

Do you sell loss leaders in the store, loss leaders being when you mark down items below your cost in order to attract people into the store with sales? If you’re those other retailers, yeah, of course, this is a time-honored tactic and retailing. Of course you’re going to use this.

The flip side of doing loss leaders is that you have to make up for it somewhere. You got to markup other goods in the store to fat margins to make it worth doing the loss leader for you. Basically, it means you’re treating your customers like they’re stupid.

That’s exactly my read on this, too. I feel like Acquired number one tenet: treat the audience like they’re smart. If you’re going to ever do loss leaders, you’re violating that tenet and saying like, we’re going to get one over on our…