Carolyn Purnell Ph.D.

Making Sense

How Department Stores Changed the Way We Understand Price

The psychology of fixed, labeled pricing.

Posted Aug 18, 2020

Illustration by Vincent Tsui
Source: Illustration by Vincent Tsui

Perhaps nothing seems more mundane than a department store, but in the nineteenth century, when they first emerged, department stores were nothing short of miraculous. 

In The Ladies’ Paradise (1883), the French novelist Émile Zola went so far as to describe the department store as “a sort of new religion.” Visitors stared in wonder at the lush, vivid arrays of clothes and inhaled perfumes, like “the incense of this temple raised for the worship of woman.” 

Department stores were a revolutionary form of commerce. They were massive. They housed thousands of different goods. Shoppers could browse for hours, all without speaking to a single seller. And perhaps most notably, every item was clearly marked with a price.

Today, price tags don’t strike us as revolutionary, but these little bits of paper dramatically altered every single aspect of economic life, from production and consumption to human perception and behavior. Here’s the story of how a few simple numbers changed life as we know it.

Retail Before Department Stores

In medieval and early modern Europe, retail was governed by an intricate guild system that assured a specific level of quality. It also ensured that craftsmen couldn’t cross into their neighbors’ economic territory, and shops were highly specialized.

At the end of the eighteenth century, guilds declined, and a new type of store emerged: the dry goods store. These stores offered a wider variety of goods, and there was no unified oversight over supplies and pricing.

Still, the idea of browsing was non-existent, and when you entered a shop, you were expected to make a purchase. In a dry goods shop, the full range of goods also wasn’t on public display, and there were no visible price tags. If someone wanted an object, they considered whether they needed it and how badly, closely inspected the object for quality, and bargained with the seller. Any transaction required a verbal interaction.

In other words, “shopping,” in the modern sense, didn’t exist, and people bought items primarily according their use value (i.e., the tangible features that satisfied a specific want, need, or useful purpose). Basically, buyers evaluated every item based on how much they needed it and how well it was made. Price was a secondary consideration.

How the Department Store Changed Everything

By the 1830s, there were signs of change, and some dry goods started fixing and marking prices. Over the following decades, many of these stores grew in scope and scale, and by the end of the nineteenth century, a new institution had emerged: the sprawling, spectacular department store, open for browsing and full of clearly labeled prices.

Department stores revolutionized commercial transactions. There was no more necessary contact between the buyer and seller, and salespeople generally had no connection to the goods they were selling. Price tags gradually dissolved the social component of retail.

Price tags also fundamentally changed buyers’ attitudes towards goods. With access to a wide range of goods with a wide range of fixed prices (and no obligation to buy), consumers changed their decision-making process. They began to think of goods primarily in terms of price. The framing was no longer, “I want and need this high-quality good, so how much can I afford to spend on it?” Instead, it became, “This object costs X amount. Is it worth it?” As small as this switch may seem, psychologically, it marked a sea change in economic life.   

The Psychology of Price

Every day, consumers are bombarded with a bewildering array of advertised prices. We assume we know what things are “supposed” to cost, but in truth, our understanding of value is highly subjective and skewed. Just because prices are fixed, it doesn’t mean they’re any more reliable than the haggled prices of earlier eras.

Many retailers use “anchor prices” or high prices that skew the customer’s expectations. When you see an item marked $5,000, it increases the product’s perceived value. In comparison, the $350 item next to it seems like a bargain, so people are more inclined to buy it. This is also why stores leave old price tags visible when they offer “markdowns.”

Anchor prices are just one of a whole panoply of price psychology tricks. These tactics are so effective because buyers today place more emphasis on exchange value (price) than use value. Think through a typical impulse buy: Do I really need that bag of candy? No. But it’s on sale! Rarely does one stop to think, where was this made? How was it made? What is the quality of the ingredients? How much did the workers make? How much is the profit margin and the price markup?

Obviously, this is a simplified version of commercial transactions. Thanks to wage stagnation, many people have to make price-based decisions. Likewise, use value still matters, to some extent. Nevertheless, on a large scale, it’s hard to argue that labeled prices have habituated us into thinking of objects primarily according to their cost.

The Slippery Nature of Static Prices

When I was young, my mother taught me a useful maxim: “If you have to ask the price, you probably can’t afford it.” For the most part, it’s proven true. Yet, it’s fascinating just how contemporary (and culturally specific) that perception is. For centuries, price was always a conversation because every financial transaction was personal.

The department store legacy of fixed prices has created a sophisticated illusion. It’s convinced us that we have a more objective, clear grasp on value. It’s taught us that social interaction in retail is either a luxury or a thing to be avoided. It’s persuaded us that we’re well-informed buyers, even though we’ve never been farther removed from the backstories of the things we buy.

During the nineteenth century, people became more and more accustomed to placing their faith in prices. Now, we frequently equate price and value, even though prices actually became more slippery when they were attached to fixed labels.

References

Miller, Michael B. The Bon Marché: Bourgeois Culture and the Department Store, 1869-1920. Princeton: Princeton University Press, 1981.

Poundstone, William. Priceless: The Myth of Fair Value (and How to Take Advantage of It). New York: Hill and Wang, 2010.

Ritzer, George. Enchanting a Disenchanted World: Continuity and Change in the Cathedrals of Consumption. Third edition. Los Angeles: Pine Forge Press, 2010.

Schivelbusch, Wolfgang. The Railway Journey: The Industrialization of Time and Space in the Nineteenth Century. Berkeley: University of California Press, 2014.