Tag Archives | shopping

How Long Should I Wait in Line for “What the LeBron”? [Economics]

imageI was listening to this NPR podcast on the fashion sneaker economy and I got interested in the people who wait 12, 24, or even over 36 hours to purchase and then resell the shoe. Is it really worth it?

I absolutely believe in time is money, in the sense that any time you waste should be considered at a labor rate. This isn’t much different from waiting in line for a new Xbox or Sony Playstation console either. In November 2001, my friend Mike and I slept overnight outside Best Buy and Walmart in a Milpitas shopping cart in hopes of getting an Xbox. We did, but at the time we were both students who had nothing better to do and also made about $8.00 an hour in our part time jobs. We also only waited about eight hours or so – even though people were waiting in line at Best Buy, no one actually went to Walmart and we got our Xboxes easily that morning.

Now that I am an adult, the economics are different. Let’s answer two questions:

1) How much is it worth for me to pay in premium rather than wait in line for the new Nike Lebrons or Jordans that are released?

2) If I look to resell the shoes, how much do I need to profit to make it worthwhile to wait in line (versus taking care of my children or just flat out working another job?)

First Scenario:

$20 an hour, $800 a week ($40,000 per year)

(Assuming 40 hours of work; let’s avoid taxes and benefits reductions for simplicity. As a side note, the average salary in the US is $1000 per week.)

The chart below shows, based on how much the shoe originally cost ($250 before tax), your expected returns and salary based on waiting (this dismisses transportation, shipping costs, etc. This also doesn’t account for the times you may actually lose out on the shoe – yikes!)

If you are looking to buy and you make at least $20 an hour at your job, it is worth it for you to buy a $250 shoe at any of the prices listed in green. For example, if you think you would need to wait a full 24 hours in line to secure the shoe, you should be willing to pay up to $700 for the new Lebron rather than wait in line. If you purchase the shoe for $700, you are paying someone else $18.75/hr to wait in line for you, which is less than your own salary.

If you are thinking, but I have to pay someone, well, think of it as outsourcing your work. How much would you pay someone to do your job? If you make $20 an hour, but you can outsource it to Bob for $18.75, you can make $1.25 an hour from doing nothing. This is an arbitrage, free money off the ground.

If you are looking to sell, the cells in red show your hourly wage rate from waiting in line.

At $20.00 (white highlighted cell), you are indifferent (waiting 5 hours to sell (or buy) the shoe at $350).

imageSecond Scenario:

$25 an hour, $1,000 a week ($50,000 per year, roughly the average pay across the nation)

imageThird Scenario:

$30 an hour, $1,200 a week ($60,000 per year)

imageFor the last scenario, let’s say you do pretty well and make the magical $100,000 a year mark. Because you make a pretty darn good salary (congratulations, by the way!) I expect that you should have an intelligent approach to your time.

Final Scenario:

$50 an hour, $2,000 a week ($100,000 per year)

imageAs you can imagine, the more you make, the harder it is for you to really profit from waiting in line if you want to resell the sneaker, but it’s also more valuable for you to not wait inline if you just want it for yourself. If I had to wait more than 2 days for a shoe and I made the average US salary, it is economically worthwhile for me to pay $1,000 for a $250 shoe on eBay or NikeTalk rather than wait in line. In the podcast, they mentioned how resellers talk about the shoes like a stock, but there is one big difference. The transaction cost for purchasing/selling a stock is minimal. I can make a trade on eTrade for $20 at any time, it’s automatic. You can set it and resell it anytime (no waiting in line as with shoes) you need based on defined amounts, there are no extra fees in terms of storage (you need to keep shoes and boxes in great condition, collectors are picky).

If you make $100,000 a year, you are better off going to work rather than waiting in line longer than one night. Do some research on Campless, for example and find the right timing to make an offer on the shoe you want.

You may argue otherwise, which is fine, but ultimately you should define to yourself how much your time is worth before blindly waiting in line for shoes, video game consoles, or the new iPhone. Especially if you are an adult, with real bills to pay.

How I Would Tackle Black Friday if I Worked at a Big Box Retailer [Business / Marketing]

imageIt used to be that Black Friday started on Friday after Thanksgiving. This year, we started on Thanksgiving itself, with Best Buy opening at 5PM.

My question: is all this really necessary? This is like an arms race, with competitors challenged to see who can open the festivities earlier. If that’s case, perhaps retailers will begin to ask “Why close on Thanksgiving at all?” in future years.

If I were a retailer looking to tackle the competition on Black Friday, I would ask the following questions:

1) Many families travel during the Thanksgiving holiday – if I live in Chicago and then fly to San Francisco to spend the holiday with my family, am I likely to go shopping and bring all that stuff (“oooh, 60 inch 1080P HDTV for $699!” back with me? In not, current Black Friday sales are excluding this substantial customer base.

2) You are probably familiar with the concept of a loss leader – selling a high profile (see TV above) item at below cost in order to attract crowds and associated purchasing – I don’t just buy the TV but since I am at Walmart I might as well buy video cables, and all this other stuff I was planning to buy. On Black Friday, do these trends continue? Do people buy more, the same, or less than if you created that same loss leader on another day? If people were going to buy that stuff from you anyway, but on another day, have you really gained anything except a loss on the TV? If people don’t actually buy the video cables from you, or buy it on another day, then you’re really in trouble. My mental image of Black Friday is massive crowds. Is this really the time to be slowly looking through the store to see what else you might want to get, or do you just want to get that super-cheap stuff and get out?

3) On Black Friday, does this start the buying season or do more people start earlier or even later? (The biggest shopping day is actually right before Christmas). I actually start buying very early, at least 1 month before Thanksgiving.

4) Do people work harder (weekends, overtime) the weeks leading up to Thanksgiving or these normal work weeks? Are they available to shop?

If I work at Walmart and feel this huge pressure to make sure Americans are using their shopping dollars at my retail locations, I realize this is a zero sum game. The more I sell, the less other stores will get, leading to stronger quarters for me, weaker quarters for them. If I stay in business, those guys…anyway you get the idea. With more retailers offering price matching, even against online retailers like Amazon, retailing is a no-holds-barred dirty war. Retailers don’t care if they lose money on some items, they just want customers to pick them for holiday shopping first.

My solution is to skip Black Friday altogether. Start the bonanza a week earlier, create your own shopping holiday (like that has never happened before?) when everyone is home and can still buy stuff. Then, offer a price-match guarantee on anything that is bought that weekend for the rest of the holiday season. My goal is to take away as much money from the retail market as possible early before the big battles start, preempt everyone else.

The details:

  • Advertise big, just as you would during Thanksgiving. But because you’re doing it when there is less competition, the ads are cheaper and you can get more coverage for the same rates. BLOW IT UP.
  • Price-matching would be returned through gift cards. I do not care what customers buy from me, if I am going to price match in the future, I might as have them buy everything now.
  • Think of price-matching as a mail-in rebate. A significant percentage of people will not bother to get the price match, but you have injected the confidence in customers that no one is going to beat you this holiday season. That means instant (financial) returns for you, the retailer who was going to price match anyway. I’d rather someone buy first from me and then forget to price match (money is worth more today than it is in two weeks) than someone either coming me to price match and buy something or just not bothering to price match and buying at that original retailer.
  • Using customer-matching technology based on past purchasing, I would offer gift-card rewards based (the more you spend, the higher rewards tier you reach, the higher % you get back) on how much was purchased during the special pre-holiday weekend, further encouraging customers to max out their credit cards at my retailer during that holiday weekend, to be given back on December 25th. I want to optimize for the hoarder mentality. I would send the customer a SMS on Christmas morning with how much they got back in gift card credit – who wouldn’t want to wake up to that? I just spent a ton of money on my family, and (instead of regret from guilt) now I am told I get money for loving them.
  • After this pre-Thanksgiving shopping holiday, I would just offer normal deals as you might expect – all I have done is move the craziness from Black Friday to a week earlier.
  • In case shoppers are still procrastinators, I would mail them a catalog with great gift ideas one week before Christmas, and then redo my super duper price-buster price matching weekend (price match + tier rewards) one more time. I clean up at the beginning, before anyone is competing, and at the very end, in the mad desperation. Again, my aim right before Christmas is to suck every dollar from the wallet but leave the customer feeling great about it on Christmas day.
  • (In case you’re wondering who shops on Christmas day itself, a LOT. As a teenager, I worked at Walgreens on Christmas day, and people would wait 30 minutes in line as cashiers rang up $1,000 shopping carts from customers buying anything available before seeing their families)

How fun would it be to take on retailers this way?

A Failed Customer Service and Social Media Lesson for Hanes.com and its Customer Service and Marketing Teams

Hanes.comEarlier this week, I found a nice deal on white v-neck tees from Hanes.com on SlickDeals. I ordered a couple packs of t-shirts and some underwear. Unfortunately, a couple of days later, Hanes.com cancelled the shirts but shipped the underwear anyway. I wrote to Hanes Customer Service:

Hi, I saw the promotion on the V-Neck shirts and this is why I decided to order from Hanes.com. Because I was making the order from Hanes.com, I also decided to get some extra underwear that I didn’t really need but was convenient to add in due to the combined shipping. However, yesterday, I received an email saying that the t-shirts would be cancelled and only the underwear would be shipped. Can these t-shirts be placed on backorder and shipped later? Otherwise, this feels almost like a bait and switch to me, and I would prefer the order cancelled. I am being shipped the items that I didn’t necessarily need while the things I actually did need are being cancelled.

I wish I would have had the option to explicitly continue or cancel the order if I had known Hanes would do this beforehand.

After a couple of days, Hanes replied:

Dear Customer,

Hanes.com no longer offers the Hanes v-neck 3 pack undershirt on our website. The Hanes v-neck 3 pack undershirt style 1A0703 that you ordered was posted on links that are not legitimate offers by our company. Any questions you have on this offer will need to be address by the website that posted this link in error.

Sincerely,

Claudine

In response, I wrote:

Dear Claudine,

Thank your for your complete lack of empathy, understanding, and willingness to help find a solution other than to blame customers for issues on your website. Now we know that any time other people promote your website and promotions via social media, customers should ignore that because Hanes is not responsible for the content on its website.

There is nothing that makes a customer feel more appreciated than being written a template reply.

I will make a note that I should never order from Hanes.com directly again and discuss the customer service issue on my website: http://www.ispithotfire.com/

Sincerely,

Michael

As I discussed in the last email, what really aggravates me the most (and creates the most lasting negative impression of the Hanes company website) is the response via template email and complete ignorance of the issue that I discussed (cancelling my entire order as I really just wanted the shirts).

While Hanes claims that the product is no longer being sold (this was found via search, however) let’s assume this is true and that the product was never meant to be sold. First, in ecommerce, it’s very easy to mark an item as not purchasable. Second, despite this, let’s discuss what Hanes could have done to help its customers and create a positive solution out of this issue.

Don’t lie to or bullsh*t the customer. I believe that if you’re honest and make an attempt to assuage customers, good things will happen. Will everyone be happy? Of course not. By offering ways to save customers, however, you can retain customers who may become long-term customers.

I do likes Hanes products, and will use Hanes products in the future, but just not order directly. Does this mean that I won’t be penalizing Hanes? No. Hanes.com likely has specific sales targets independent of its 3rd party sales. Hanes.com would like to sell more items directly because the profit margins are much higher because it removes the middleman and it provides a customer base to learn from (gather customer data) and improves opportunities for future direct sales (customer lifetime value). If I buy Hanes shirts from Walmart, Walmart eats into those profits.

Thus, we can treat this situation as a marketing misstep. Hanes should have an expected customer acquisition budget, an amount they pay on average to acquire a new customer to their ecommerce site. Let’s say this is $5 per customer. I bought the t-shirt packs for $3.99 and lets say its retail price lists at $15.50, an $11.51 difference. Note that this is not the normal selling price nor is it the actual cost to Hanes. A similar pack is currently selling for $10.99, which is a $7 difference from the cancelled promotion price. If the customer acquisition is $5, Hanes will take a bit of a loss by selling the packs at the low price rather than not selling it at all.

Of course, there are other things to consider, such as negative PR impact by not allowing the sale, but let’s assume Hanes is uncomfortable will taking that loss. Besides, Hanes Marketing could be thinking, well, what if these customers are only here to buy this super cheap item and will never come back. That means we lose money for unprofitable customers.

In that case, Hanes could offer a new coupon to customers in this situation, a 25% off coupon for purchases over their normal average order size (what an average order brings in revenue). If that is $30, the coupon would be 25% off orders over $30. At 25%, Hanes would lose potentially more money (in profits, not necessarily losses), but could gain it back in sales volume. Customers would need to purchase a variety of products, potentially leading to better share of wallet and longer term product and brand loyalty (assuming the products are quality). People who only wanted to take advantage of the super cheap deal would be weeded out, leaving customers who really want Hanes products. There is some math that would need to be done based on Hanes’ actual profit margins, but you get the idea. The coupon needs to be significant where it fulfills both sides. Hanes needs to make a decent amount of sales from people who are serious customers. Customers need to be provided an offer that has real benefit and feels like a legitimate apology – for example, a 10% coupon would probably feel insignificant.

In the communication, Hanes would simply explain 1) we made a mistake, this was an error listing and we didn’t catch it 2) to apologize, we want to offer this exclusive coupon to you.

With over 100 people who explicitly said they participated (purchased) in the deal (I estimate the actual figure could be 3-5x more because typically, 80% of all users are passive), there would be a great opportunity to attract new users and also reverse negative sentiment created by this situation – look at the responses from other customers on SlickDeals (this is the most powerful potential impact by Customer Service teams, to not just be a cost center but to convert sales). Contrast this to the current situation in which Hanes is blaming customers for sharing links to Hanes.com via social media and promoting Hanes for free.

What do you think? What other ways could Hanes create a positive (and profitable) business impact in this situation?

(Edit: June 21, Julie Jenkins, Hanes.com Customer Service Manager contacted me and we found a resolution together on my individual issue. Thanks very much to her!)

Buying Football Jerseys for Cheap in Madrid, Spain

If you are looking for where to buy a Spain-inspired football (soccer) souvenir like a club or national team jersey (shirts) while in Madrid, check out a Deportes Halcon. I absolutely love collecting jerseys, but only ones at a good price, and I found a good keepsake of my travels in Spain.

Ha and I each got Adidas Spain National Team jerseys (Climacool) on clearance for 20 euros each ($28). These jerseys normally retail for $80 and over.

Ha’s 2013 Spain jersey with 2010 FIFA World Cup champions patch:

I got an authentic Spain jersey as well, but mine was a 2012 jersey celebrating Spain’s second consecutive Euro win:

Other items, such as this current year’s Real Madrid and Atletico Madrid jerseys and jackets were on sale for 30% off (Teams are about to release next year’s jerseys). In doing more research, I found reviews of this shop in Spanish on Yelp, with Google Translate testifying that Deportes Halcon is a considered a great shop for well priced and discounted sports clothes and gear.

Below is a storefront picture of the one nearby Ha’s apartment in Salamanca.

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For more locations, check out below or their official website.

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