Who wins, who loses in the great exchange offer?

image0012ANANTH SHENOY writes: A big retailer in Mysore is running a ‘scheme’ for the public, offering to buy old rags for a prize! This has already been around in other cities already.

Turning rags to riches? Hold it, there is a catch.

The consumer will get not money in return but coupons of equivalent value which can only be redeemed with the retailer. Moreover, the consumer needs to buy four times the coupon amount to redeem it. Not for all categories, but select ones.

Is it a good offer?

Let’s consider this example. My friend wanted to value his old furniture which he had bought ages back for Rs 1,000. The big retailer’s agent told him that he would get a maximum of Rs 2,500. Appreciation for furniture? Maybe for rosewood or teak ones. Not for those made out of plywood and plastic. Once he got coupons worth Rs 2,500, he needed to buy stuff worth Rs 10,000 to avail a flat discount of 25% discount.

The retailers can value the junk as per the perceived size of the consumer’s wallet. The more the value assigned, the more the consumer has to spend. Instead of 25% flat discount for apparels, furniture and the like, this offer works better on the consumer’s psyche. Apart from that, the retailer gets back about 1-2% by sale of the rags to the scrap dealer.

Post-script: Inside information is that the scrap dealer is ready to make direct deals with those who do not want to accumulate those ‘wealth’ coupons!