15 September 2010

Good Consumer, Bad Business

Over the last decade, Americans have adjusted their habits as consumers.  Date night used to be on a Friday night; we'd go to dinner at O'Charley's where we'd have a drink or two with our meal, maybe share an appetizer.  Then off to see a movie in digital glory.  We didn't mind that they charged an extra dollar for it being Friday night; that was cost of the excitement.  Then we stopped having those appetizers and drinks before the movie.  Before long, we were hitting the dollar menu at McDonald's on our way to a matinee showing during the week and priding ourselves on how we'd saved money and avoided the crowd.

Of course, many Americans consider themselves fortunate if they can still justify the dollar menu at McDonald's. Each of us has adapted our habits in our own ways, reflecting our own financial situations as well as our obligations and priorities.  I haven't paid for a new book in ages; yet my library has grown more in the last three years than ever before, thanks to Half Price Books.  I won't deny that the lion's share of those purchases came from the $1.00-$2.00 clearance section.  I can't even remember the last time I was a paying customer at a Barnes & Noble or a Borders.  Besides, I can sell stuff back to Half Price Books once I've finished with it, thus perpetuating the cycle.  I can't take books I've read to Barnes & Noble and trade them in for new books.

There is, however, another side of this to be considered.  Thanks to consumers like me, Barnes & Noble and Borders may go the way of the dodo within the next year.  Many economists have speculated that a merger or outright closure of both is all but guaranteed.  That means more Americans will receive pink slips and find themselves among the already too-large pool of unemployed vying for an insufficient number of jobs.  Will I buy $25 hardbacks just to try to keep a few people I don't know employed?  No.  I feel bad about it, though, which is more than I'm sure could be said for those at the top who could have adapted their business model long before now.

See, I can't set MSRPs (manufacturer's suggested retail prices).  I don't have anything to do with determining what discount rates apply to which bulk buying volumes.  Nor do I have anything to do with determining how much better the pay is the higher up the employment ladder one climbs.  I'm sure, once upon a time, the top folks at Circuit City felt they really deserved their ill-proportioned salaries; that they shouldered the big decisions.  When their company faced dramatic loss of sales, they responded by cutting lower-paying jobs.  Best Buy has weathered the storm better, in large part thanks to the way Circuit City handled it.  See, when the people at CC cut those lower-paying jobs (to ensure that enough revenue could be spread around to maintain their salaries), they made it harder for the consumer to get friendly help in the stores.  Under-staffed and over-worked, for the same pay, who could blame the increasingly apathetic and even unfriendly remaining Circuit City staff for their behavior?

I don't know what the board meetings at Barnes & Noble or Borders have discussed.  Maybe they've been too concerned with maintaining their own income levels to make decisions more favorable for the company. I don't know.  What I do know, though, is that the average American consumer has scaled back as much as he or she really can over the last decade.  The problem is that our economy largely rested upon frivolity.  We've learned to find cheaper alternatives, to go out less often.  And we've adjusted to these new ways.  I used to go to at least ten Reds games a year; now I'm doing well if I go once every two years.  The rest of the time, I content myself to watch on TV.  It's not that I care less about the team; it's that going to games in person isn't the priority it used to be and our budget frowns on making it a habit.

It seems that the owners and operators of our businesses haven't caught up with the rest of us yet.  You can't make money selling $100 blue jeans and $30 hardcover books in a society that has gotten used to buying cheaper brands and used paperbacks.  I don't know what the savior of the economy will be, but I can tell you this: anyone who thinks the calendar will ever re-set to the 1990s is mistaken.  And that top 2% that has all the money can't just try to sell us the same things again, or hold hostage a dwindling number of retail jobs.  There are way too many important issues to be addressed in the world; there's no excuse for an economy to rest largely on the self-indulgence that few of us can still afford.

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