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Employee discounts move beyond cars

But some of the promotions are nothing but a regular sale with a trendy new name

Taking a cue from the nation's automakers, a widening variety of retailers are extending coveted "employee discounts" to all shoppers. Stores selling everything from computers to golf clubs are holding sales offering consumers the same price cuts they once reserved exclusively for their workers.

Retailers are hoping to replicate the results of General Motors Corp., DaimlerChrysler AG and Ford Motor Co., which saw revenue surge after they rolled out employee-discount offers earlier in the summer. Spurred by the promotions, in July automakers recorded their third-best sales month in history.

Unlike Detroit's Big Three who are offering their promotions on most 2005 models to clear them out before 2006 ones arrive, other retailers generally aren't trying to empty out their stores and are offering discounts on a smaller portion of their inventory. As a result, the promotions outside the car industry tend to be shorter, and focused on a limited number of items.

Many of the retailers introducing the employee offers are regional chains, but some national companies are following suit. CompUSA offered customers "employee pricing" on laptop and desktop computers from brands like Apple and Sony for two days in July. The company is considering repeating the offer.

Bealls Department Stores Inc. gave customers its employee discount, 20 percent off, on everything in its 75 stores in Florida on Aug. 3 and plans to run the promotion again before the end of the year.

Smaller retailers also are getting in on the game. Condor Golf of Phoenix, for example, is offering customers an employee discount of 10 percent to 30 percent until at least Oct. 1. Now, a Cobra titanium driver that normally sells for $370 is going for about $280.

While many companies long have given their employees special rates, such deals never have been passed along to customers on such a widespread basis until this summer. Previously, employee discounts generally were given to customers only as part of department stores' "friends and family discounts" days or by the rare lone retailer who hit on the idea.

The current deals aren't the first time retailers have taken a cue from Detroit's Big Three. GM's "0 percent financing" offering as part of its "Keep America Rolling" promotion after the Sept. 11 terrorist attacks in 2001 quickly spread to other industries like furniture and appliances.

While some of the employee-discount sales are truly novel and some retailers are extending some of their steepest discounts ever, industry watchers warn that others are simply a marketing ploy: They are just regular sales with a new name. Retailers have their " 'end of summer' sale or 'dog days of summer' sale and now they are just calling it the employee discount sale. It's just a little more catchy," says Bill Cody, managing director of the Jay H. Baker Retailing Initiative at the University of Pennsylvania's Wharton School.

For instance, last month, Menard Inc.'s Menards chain of home-improvement stores ran a "10 percent Off Employee Discount for Everyone" sale on nearly everything in the store. A coupon for the promotion came in the shape of an employee badge. But Menards frequently offers customers sales, some more generous than 10 percent off. "It's not unusual for us to have a sale named a certain thing," says company spokeswoman Dawn Sands. "This one is just called the employee discount sale."

Some retailers are finding that tagging a sale with the employee-discount label makes customers buy more than they would at a regular sale — even when the price cut is identical. Dave Austad, president of Austad's Golf, a Sioux Falls, S.D., golf retailer with 10 stores and an online store, says the company did 25 percent more business by offering a 20 percent off employee discount earlier this month to online customers than when it offered just a regular 20 percent off sale online in April.

Dipankar Chakravarti, a professor of marketing at the University of Colorado and a past president of the Society for Consumer Psychology, says consumers may be more attracted to an employee-discount sale because of the assumption that "things that firms do for their employees are somehow more generous."

In fact, retailers who give every shopper an employee discount risk angering their workers, who may feel they have lost an important perk. Companies generally don't raise their employee discounts for employees in lockstep with the promotions.

Executives acknowledge the sales aren't always popular with workers. "It just seems like — what about your employees?" says Tracie Dean, general manager of Jim Ellis Audi of Atlanta, which is offering employee pricing on remaining 2005 models.

Still, retailers around the country are rolling out deals. Moana Nursery in Reno, Nev., offered its employee discount of 30 percent to customers from July 28 to Aug. 3. The sale "pumped up business," says Julie Muhilly, the company's manager, garden specialties.

Beyond cars, other vehicles from snowmobiles to motor homes and motorcycles are being sold at employee prices. Michigan chain General RV Center is giving customers anywhere from 15 percent to 30 percent off its 2005 and 2006 recreational vehicles depending on make and year. Woods Fun Center in Austin, Texas, is offering employee prices on 2005 in-stock motorcycles, about 17 percent off the manufacturer's suggested price on average, through Labor Day. Other items that have been offered at employee pricing this summer include apartments for rent and manufactured housing.

Most of the retailers joining the employee-discount bandwagon tend to offer items people normally don't buy every day, say refrigerators or sofas, rather than cheaper necessities like food or socks, says Ellen Tolley Davis, spokeswoman for the National Retail Federation, a retail trade association.

Companies also generally are passing along their employee discounts on a much more limited basis than Detroit's Big Three. CompUSA, for example, limited its promotion to computers because it felt that was the "engine" that drives technology sales. "You buy a notebook or a desktop and realize, 'gosh I need a printer or some cable,' " says Phil Jacobs, executive vice president and chief marketing officer.