Discounts are free if your time has no value

“Love it or hate it, Black Friday is all about the deals,” AdAge says, in Target, Amazon, Poised to Win Black Friday. That love/hate conflict speaks to the mixed blessings (and curses) of tying a store’s — or a whole market’s — success to “deals” alone. The bargains, for both retailers and customers, can be Faustian.

Exhibit A: Kmart.

Back around the turn of the millennium, I attended a retail conference where two of the speakers were myself and Lee Scott, then the CEO of Walmart. We represented the bookends of demand and supply: as a co-author of The Cluetrain Manifesto, I represented the customer. As CEO of the world’s largest retailer, Lee represented his whole industry.

The location was Lucerne, and the lunch was boxed. It was a nice day, so my wife and I took our boxes outside and sat at a small table near the lake. Lee came over and asked if he could join us. I said sure, and then used this rare opportunity to pump the dude with questions. My first was “What happened to Kmart?” — which was then closing stores and heading toward bankruptcy.

His answer: “Coupons.” Some large percentage of Kmart’s overhead, he said, was devoted to publishing what amounted to its own currency, and then dealing with numerous effects, which only began with the time wasted by handling that currency at check-out. In addition to inconveniencing everybody involved, couponing also had the effect of “downscaling” the demographics of the customer base to a caste then known to the trade as “coupon-clippers.” (This population has now become so large — and expert — that the reality TV show Extreme Couponing persists into its third season.)

Walmart, Lee explained, minimized its dealings with coupons — and even advertising, which was limited (by decree of the late Sam Walton) to some small percentage of the company’s overhead. Instead they let the company’s tagline, “Everyday low prices,” do most of the work. (That tagline was also Sam’s.)

When I asked Lee if there were any large retailers he thought did an especially good job, he singled out Costco, which also succeeded through simplification. (Yes, they do publish and take coupons, but it’s a side thing, rather than the main thing. As a Costco customer you don’t need coupons to obtain the sense that you’re paying a low price for the goods they sell.)

Retailing has long had its time-sucking frictions. When I was growing up, in the 1950s and ’60s, the big one was stamps. The main driver of the trend was S&H Green Stamps, which had many competing imitators. The original idea was for retailers to differentiate from other retailers by offering sheets of stamps with every purchase, which customers could paste into a booklet, which they would later trade in for an outdoor grill, a door mat, or some other item from a catalog. It’s been said that S&H at its peak issued more stamps than the U.S. Post Office, and that the largest press run in human history was the 1966 Green Stamps catalog. Eventually, however, nearly every store offered the stamps, differentiation ended, and whole fad collapsed.

Today we have a similar fad with loyalty cards. Never mind that most retailers (or so it seems) now have them, but that they have costs to both retailers and customers. Here are just a few:

  • Maintaining two or more prices for items throughout the store
  • Forcing both personnel and customers to attend constantly to the differences in prices on “discounted” items
  • Partially or completely obscuring what the “real” price might be. Is the non-discounted price a surcharge for non-card-carrying customers? Probably, if the “regular” price for a dozen eggs is $3.99, and the “discount” price is $1.99 — when, say, Trader Joe’s (which has a single non-discount price for everything) wants $1.99 for the same eggs.
  • Maintaining “big data” systems for tracking customers and “personalizing” offers for them.
  • Obscuring the real value of goods gets even more than it already might be.
  • Coercing loyalty rather than earning it, causing emotional dissonance that can damage a company’s brand value.

All those practices, and many more, are both normative and highly rationalized within retailing today. Yet the notable exceptions, such as Trader Joe’s, reveal how much time, money and effort by both sellers and buyers in systems that are essentially coercive.

What would happen if we began to respect time as our most essential value? Would we have discounting at all? Not sure, which is why we need to talk about it. There are real costs to discounting. If our time has any value at all, then discounting is not free. And the hidden costs may be far higher than the obvious ones.

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