Yesterday I ran over to Macy’s to do a little Christmas shopping for my better half. I heard the department store was running their “1-Day Sale” which they advertise as their biggest sale of the year and actually runs two days. That juxtaposition should have tipped me off.

Because she reads this blog I can’t say what I bought but I will say that it was marked 50%-off and I had a 25% off coupon which was good even on top of their already discounted products. I was in a rush so I paid for my items and then had a funny feeling that I overpaid.

I looked at my receipt and noticed that the clerk only took 20% off of my purchase so I turned around and asked the clerk about it. She told me that the 50%-off only applied to certain styles and my coupon wasn’t valid until November 30. 20%-off she said was the correct discount.

So I, the customer, walk away feeling deceived after getting a 20% discount, a discount that under normal circumstances would make me feel pretty good about a purchase. So why didn’t I feel good about it? I thought about it and realized I couldn’t feel good about it because I couldn’t be sure I got the best possible price.

And this is the problem with “old retail” or the old way of selling things. Old retail starts with an outrageous price trying to get people to drastically overpay. We discover this when we see these same items go on sale for far less than when they first hit the shelves. This causes us to distrust this source the next time they try to sell us something. In this way, old retail teaches us not to trust them and when we do overcome this distrust we still don’t feel good about doing business with them.

Not only do most department stores operate this way. Car dealers, supermarkets, jewelers, etc. all work this way. Think of any purchase that you’ve made where you didn’t feel 100% great about it after you handed over your hard-earned cash. It’s got to be a majority of your purchases, actually. I know it is for me.

This is where new retail has taken advantage in the marketplace. New retail only has one price and it never goes on sale. New retail has a set profit margin and makes a commitment to their customer that it will never gouge them. In response we, as consumers, trust new retail and feel good about purchasing anything we can from them because we never have to wonder if we overpaid or were taken advantage of.

This is where Costco has taken market share from everyone from Sears to Safeway. My guess is that companies that apply the Costco model to other industries will be the retailers of the future because they build a unique bond with consumers built on trust. Companies that are married to the old retail model will continue to slowly go tits up and wonder where they went wrong.