Many people wonder how a product can be so expensive in a store and yet so cheap online. The answer to this question is that big companies want to sell more of their products. The more they sell, the more profit they make. It’s a game of volume, and to reach more people, they tap onto different retailers and e-commerce websites.
E-commerce companies and retail outlet chains buy goods directly from manufacturers. The product reaches the store from the warehouse. There is no distributor or sales network in between. This means many expenses are reduced for the retailer . The retailer gets a large margin in profits. This benefit is passed on to the customer as zero percent finance or no-cost finance.
The retailer pays interest to the finance company from his margin. The retailer gets a margin of more than 20 percent on the products. Even if he incurs expenses of up to 15 percent, he still makes a good profit of 5 percent. Now, multiply this profit by volume, retailers sell not just one or two products, but thousands of such products, which is why retailers extend such offers and try to get more customers.
Both the manufacturer and seller want to sell their products and increase their sales. For people short of cash, payment through EMI is an easy way instead of making a lump sum payment. However, this often makes you fall for a trap. Usually customers who cannot afford to buy an expensive product buy it when its payment is made in EMIs.
The no-cost EMI feature doesn’t always benefit you. Many times, companies add fees such as processing fees and file charges to the product’s cost under the guise of zero-cost EMI. At the time of purchase, it is revealed that the item is available for Rs 20,000 if lump sum payment would be made. But the customer will have to pay total of Rs 25,000 if he buys the same product on EMI. Although the EMI is said to be interest-free for the customer, but the company recovers the interest in the total price of the product. Customers are attracted to zero-interest loans, but they end up paying the interest from their own pocket.
SD Vashisht, Co-Founder & CEO, FinAnS Corporate Services says “Companies lure customers by extending zero percent schemes. When a no-cost EMI option is available, people buy products even if they don’t have money. Manufacturers, retailers, and finance companies make huge profits by changing the consumer’s sentiment. Companies do not reduce the price of their products. Reducing the price reduces their brand value. discounts and no-cost EMIs eventually increase the brand value of products.”
Nothing is free in this world. Through such schemes, companies lure customers to buy their products. If no-cost EMI option is available, then, even if people don’t have money, they still buy that product. When choosing an option like No Cost EMI, one should make sure to compare the product price if one had to make cash payment and when one had to pay through EMIs. Please Understand that nothing comes for free in this world. Ask the retailer if any additional charges are included in price of the product . If you want to take advantage of such offers, make sure to compare offers from two or three different retailers.
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