The high cost of cheap.

I'm quoted pretty extensively in a Bulletin article today:

"THEIR LOSS (Leaders)

"How to use retailers' profit-losing specials to your advantage."
By Eleanor Pierce.


*****

In fact, I think I'll just quote my section in whole out of the middle and comment on it. The reporter quoted me accurately, but of course there is always a little context and info left out of any article:

....

"Duncan McGeary, who has owned Pegasus Books of Bend for 30 years, said it takes more than just good customer service to make it. He said he watched bookstores fail with the advent of Amazon.com, plus the arrival of discount retailers like Walmart and Costco and the national chain book seller Barnes and Noble.
He said businesses can keep most of their customers by offering great service. But they can't keep all of them, and the few they lose can mean the difference between success and failure.

(O.K. The failing bookstores I'm talking about are almost all the bookstores that existed in Bend when B & N arrived. The crop we have now have come in since.

This also makes it sound like I think service is more determinative of success than I probably really do. It was in reaction to the "Expert" in the article saying that small business can "compete" by offering more service. I didn't know this expert's comment would be directly before my comments, but -- you know -- it's what all the experts say....)


"It isn't the fact that they take all your business, they take the cream. It's that little bit extra you need to make it work," he said.

(Can I rephrase that? "It isn't that they take all your business, but they can take the cream off the top. The little bit extra you need....")

McGeary's approach is to specialize.

"I purposely carry material I don't think chain stores are going to carry at all," he said.

"For instance, I carry lots of new books, but I don't make a huge effort to get the best-sellers. They're almost always in the stacks at Costco. People can get those for half price, so why get them? But I'll carry all the Hemingway books, all the Ken Kesey books. I know those are not going to be loss leaders, so my price is the same as their price."

(A bit of conflating everyday low prices versus loss leaders, but the principle is the same.

"He said there have been a few times he's been hit over the years. Sometimes a specialty item goes mainstream, and he has to give it up.

For instance, McGeary sold sports cards from the mid 1980's until the early 1990's.

"I did very well with them," he said. But then they went mainstream.

"I remember a cold chill going down my bakc the day a customer came in saying, "I just bought this box of baseball cards at Costco in Eugene for this price." It was $2 less than I just paid at a wholesaler."

So he stopped selling them."

(Actually, I didn't stop selling them -- I just stopped depending on them as a main product line.)

"That just didn't work for me any longer as a specialty item."

(The expert goes on to say that:)

"....smaller businesses also tend to draw customers by offering services big-box stores can't."

( True enough, except that these services often don't really result in higher sales: the 20/80 rule applies. The chain stores scoop up the best-selling 20% and leave the other 80% to be serviced by the specialty stores.)

(There is one great quote from the expert:)

"There's a calculus as a human," Kahle said. "As you go from store to store it costs you time. You're going to end up spending a lot of money on travel and a lot of time, and time is also costly."

(I'm amazed by how little people value their time, energy and travel costs. For instance, I might have the book I'm looking for at full retail price, but they prefer to look for it used: Never mind that I've pretty much told them that they aren't likely to find that book used -- either because it's too new or too popular -- but the retail price is often just a few bucks more....Hell, minimum wage is 8.50 an hour and many of these folks would never deign to work for 8.50, but they'll keep looking for an hour to save a couple of bucks...."

All in all, a pretty good article.