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CONSUMER BEAT

Filene's Basement markdown policy gets a makeover after 96 years

The downtown Boston Filene's Basement store has quietly altered its 96-year-old ''world famous" automatic markdown policy, making consumers wait longer to snare the steepest discounts.

The old policy, put in place in 1908 by Edward A. Filene, the son of the founder of Filene's, offered a 25 percent markdown on items not sold after two weeks and ratcheted that discount up to 50 percent after three weeks and 75 percent after four weeks. After five weeks, the item was given to charity.

The new policy keeps the timing of the initial discount in place but forces shoppers to wait an extra week for the 50 percent discount and two extra weeks for the 75 percent discount. Items are donated to charity now after eight weeks.

Company officials said the changes were made to help the store improve its profit margins, with the extra money helping to pay for the purchase of a wider and better selection of merchandise for the selling floor.

''The original objective has never changed, and that is to move merchandise as fast as possible while maximizing the margins," said Basement spokeswoman Pat Boudrot. ''We gave ourselves more time to maximize the margins on a small amount of merchandise."

The markdown changes were implemented quietly at the end of January when Basement officials changed the discount-trigger dates on the signs scattered throughout the store that explain the ''world famous markdown plan." To determine what discount applies, a shopper has to compare the date on the sales tag of an item with the discount-trigger dates on the sign.

Only the most serious Basement shoppers noticed the change and asked store officials about it, Boudrot said. Edgar Dworsky, who edits Consumerworld.org and is a frequent Filene's Basement bargain hunter, noticed the change on a recent shopping visit.

''They sneakily doubled the waiting period before the deep discounts kick in," he said. ''The Basement did it in much the same way that manufacturers downsize products an ounce or two -- they keep the packaging the same, and don't call attention to the change."

Annie Rusher of Charlestown, who described herself as an avid Filene's Basement shopper as she roamed the store recently looking for bargains, said she hadn't noticed the change. ''It's just the dates you look at, so you'd never know," she said.

Several shoppers said they thought Filene's Basement was also exempting more items on the shopping floor from the automatic markdown policy, but Boudrot said the exemption list hasn't been expanded in more than five years.

Items not covered by the markdown policy are clearly marked. For example, a sign above the Bill Blass cashmere and camel hair sportcoats last week said the coats were not subject to the markdown policy ''to provide you a larger assortment on the selling floor."

The automatic markdown policy was created in 1908 when William A. Filene asked his son, Edward, to develop a way to move excess merchandise. Edward came up with the automatic markdown policy and the concept behind Filene's Basement, which store officials describe as the world's first off-price store.

Photos taken from the early 1900s show the original Filene's store on Washington Street with signs out front trumpeting the ''automatic bargain annex" and an explanation of the automatic markdown plan. After Filene's moved to its current location on Washington Street, the annex eventually became known as the Basement.

The original Filene's Basement markdown policy was based on a six-day week, since state laws barred stores from opening on Sundays. Once the downtown Boston Filene's Basement store began opening on Sundays, the markdown plan followed the same format but based the discounts on seven-day increments.

The new markdown policy is the first time the original format has been changed in 96 years. It affects only the downtown Boston store; the chain's other Basement stores don't have an automatic markdown policy.

Boudrot said the markdown changes won't have a major impact on customers because 90 percent of all store items are sold in the first four weeks. (The new policy keeps the 25 percent discount in place for weeks three and four, while the old policy upped the discount to 50 percent in week four.)

''The point is, Filene's Basement is a deal from the start," Boudrot said.

Margaret Connolly, 93, of Dorchester, couldn't agree more. She said she hadn't noticed the change in the markdown policy, but that didn't stop her from buying two purses that were on sale recently. She laughed at her inability to resist a deal.

''The older I get, the more I want to go shopping down here," she said. ''I've done it all my life. I love it down here."

Goodwill Industries, which regularly receives shipments of unsold goods from Filene's Basement, said the flow didn't taper off after the Basement extended the time before an item is donated to charity from five to eight weeks.

''We haven't noticed any kind of change at all from what they've supplied us in the past," said Goodwill spokeswoman Kathy Melley.

Filene's Basement was purchased along with Filene's by Federated Department Stores in 1929. The Basement operations were spun off as a separate company in 1988 and purchased by Value City Department Stores Inc. in 2000, which changed its name to Retail Ventures Inc. last year.

Retail Ventures operates 24 Basement stores in eight states and the District of Columbia. It also runs 116 Value City stores and 151 DSW Shoe Warehouse stores. The company reported a net loss of $1.5 million for the three months ending May 1.

Rebate wrap-up

The Federal Trade Commission has reached a $40,000 settlement with the two former owners of Cyberrebate.com, the website that offered full rebates on everything from TVs to TV Guide before it was forced to file for bankruptcy in 2001.

At the time of the bankruptcy filing, Cyberrebate owed $80 million in rebates to 200,000 customers across North America. Credit card companies ultimately issued about $36 million in chargebacks to customers, leaving a net loss of approximately $44 million.

Barbara Anthony, the FTC's Northeast region director, said the $40,000 fine was all Joel Granik and Joseph Lichter could pay. ''The $44 million is gone," she said. ''Our goal was to prevent these individuals from operating a similar business in the future."

Cyberrebate became an Internet sensation when it hiked the prices of goods to ridiculous levels but promised full rebates within 10 to 14 weeks. A 13-inch RCA television set that normally sold for several hundred dollars went for $1,099 on Cyberrebate with a full rebate.

The company's unusual business model allegedly relied on some customers failing to file rebate forms, but that didn't happen often enough for the firm to deliver on its promise of ''free after rebate."

Bruce Mohl can be reached at mohl@globe.com. 

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