Opening chapter one of Thomas Sowell’s, (PhD economics) book, Basic Economics, A Common Sense Guide to the Economy, fourth edition, is a quote by George J. Stigler:
“Whether one is a conservative or a radical, a protectionist of a free market trader, a cosmopolitan or a nationalist, a churchman or a heathen, it is useful to know the causes and consequences of economic phenomena.”
Dr. Sowell’s one main premise in all of his writing has been unchanged over time and that is that economics should be as uncomplicated as it is informative. Economics is a subject that anyone can understand if they can read, if they can discriminate, challenge and evaluate competing ideas and apply their own intuition or common sense as evaluations are underway.
One of the most fundamental definitions found in Mr. Sowell’s book referenced above is his definition of economics:
“Economics is the study of the use of scarce resources which have alternative uses.”
Using this definition, it seems to be fairly obvious that companies who can live withing the terms of this definition in a way that most efficiently and effectively allocates scarce resources with alternative uses is the company most likely to be successful in an environment where people want the item being sold and like the price that it is being sold at. Competitors who sell at higher prices, even though their production or operating costs are higher, will not do as well as other competing entities who sell the same object at lower prices.
If all things are equal in terms of production, resources and price, one of the other key factors to consider is customer service. Unlike government service, there are actually other entities competing for customers and sales in service industries such as Sears, K-Mart, Wal-Mart, Target, Best Buy [soon to fall], etc. With government services, such as the DMV, you have no alternative but to accept the service as it is provided; there are no alternative choices available to you.
However, in private sector service industries, there is always competition to some degree. As I mentioned above, he who can provide the best price for the same quality has the best chance of succeeding in moving along items in demand produced from scarce resources with alternative uses. But price is not the only key to outlasting or out performing the competition. When all else is equal, the choice of customers may come down to which entity treats them with respect and recognizes that they too are scarce resources with alternative choices.
Today, I stopped at K-Mart to purchase a dozen “Moshi Monster” toy/card packets as a reward for my 6 year-old grand-daughter who has been making an effort to consistently use the words/phrase, please and thank you. I didn’t consciously choose to go to K-Mart but stopped in because it was the closest store on the way home from visiting my son and other grand-children, and my wife knew that they carried those toys.
We parked fairly close to the store at the Billerica Mall and entered K-Mart as usual. I noticed that the new construction was going along well and actually made the entrance area appear much neater and cleaner than I’ve seen it in nearly two decades. I was pleased with the changes and with my rare decision to shop there.
I quickly found the toys, which they carried in sufficient quantity to all me to purchase a dozen and still leave lots more behind. All seemed to be going well. I noted that their usually disorganized and confusing displays seemed to be somewhat improved and the aisle floor areas seemed to be cleaner than usual as well.
As an aside, I always see floor cleaners scrubbing the deck at bulk stores such as BJs, COSTCO, and Sam’s Stores, but can’t ever recall seeing anyone actually clean inside of a K-Mart. This is just one of those obscure observations that have kept me from choosing K-Mart as a primary stop.
What disturbed me about my visit this time, and what now guarantees that I will never set foot in another K-Mart or Sears, as they are now one and the same and representative of each other’s values, was the poor customer service I received. Let me make clear that I do not hold the cashier responsible for any of this negative reaction. She was merely the portal between me and bad, inefficient and ineffective management.
When I got to the line, there were only two people ahead of me. Each had less than a half-dozen items and one was already beginning to be rung up. Having to get to another destination after dropping off my wife, I looked at my watch and noted the time.
The cashier ringing up the first lady in line seemed to be taking a long time to scan in a few product prices, get a total, accept a payment (ultimately made by check), hand out a receipt and move to the next customer. Other than the perception of the ring up taking a long time, I didn’t think too much about it.
After the first customer left the line, the cashier began to ring up the woman directly in front of me. I noticed that some of the prices were difficult to scan and one scanned differently than it was advertised – it actually scanned cheaper. O.K., a little delay is understandable here. But, it is what happened next that got my attention.
When that customer was done being rung up, the cashier then asked her if she had a rewards card. She answered, no. She was then asked if she wanted to apply for one as it would only take a minute or so. Again, the customer answered, no.
The customer was then asked if she had a Sears credit card or, if not, would she like to apply for one as part of her check out. The woman answered that she did have a Sears credit card; so, there was no need to apply for one. [At this point I immediately thought, why can't the woman use her Sears card as a rewards card; since, the reality is that the two companies are actually one and the same.
But, apparently, that credit card is not valid enough to function with an efficient and effective dual purpose. The net result of that interchange was that the customer was to be penalized for not having a card that would reward her for shopping in K-Mart and for being a customer of Sears; K-Mart's parent.
But, here came the real frustrating part; the part that actually put me over the edge and devoted to the proposition of never setting foot into a Sears or a K-Mart again; no matter the value of a sale. The woman who had just experienced all that I described above was insulted with even more inept management obstacles.
She swiped her credit card and, instead, of the device ringing up the price for her to review and certify as O.K., it came up with a customer service survey question, "Would you recommend shopping at K-Mart" (paraphrasing). She apparently did not want to answer; because she swiped her card again, and again, and again. Finally, the cashier told her that "the system" would not let the check out proceed further until that question was answered.
Well, the customer clicked on an answer (I don't know which of the 5 options she chose); then, she tried swiping her card again, and again, and again, until finally, whatever glitch the not answering initially created was cleared by the repetition. From there, she had to verify the total, approve the purchase by signing the device and waited not seeing that the check out could not be completed until you pressed receipt or no receipt. The cashier came around the register desk and did that for her.
By this time, I had been in line for what seemed like an eternity. I have a bad disc in my back that is only troublesome if I stand in place too long and it was telling me to hustle my butt through the line by causing my leg to painfully burn. But, I refrained from saying anything and the cashier proceeded to finally check me out.
She rang up items I purchased. It was around $20.00 total - not a big purchase. I made the payment in cash and waited for my change. But, before she would give me my change she asked me to follow the instructions on the credit card swipe device.
Puzzled, I looked and it was asking me what my recommendation about K-Mart would be to others. Now, I was pissed; so, I pressed that I would NOT recommend others use K-Mart. I waited again for my change, but the cashier told me that should couldn't complete the sale until I pressed whether or not I wanted a receipt for my CASH purchase! I couldn't believe it, but complied to get the sale done, get my change and put K-Mart in the rear view mirror.
When I got to my truck, I noticed that from the time I first got into line to pay until the time I waited for just 2 other people with small purchases to check out and for me to walk about 30 yards, 16 minutes had elapsed. Now, here is where the definition of economics comes into play.
It took me 12 minutes to earn the $20.00 purchase price. I spend 16 minutes in line and as a result my time spent assisting K-Mart's customer survey system cost me $25.00 worth of my time. I was effectively hit with a $5.00 tax for the pleasure of using K-Mart to buy an item I could have purchased at ToyRUs, Target, Wal-Mart or online with much less time and aggravation spent wasting my precious time in line.
In economics, the people needed to comprise a work force are limited resources and customers to purchase or swap goods are, likewise, a limited resource. Each have alternative uses [or choices] that will eventually migrate to where they are best and more efficiently used or treated. K-Mart, and hence, Sears, has failed to consider the importance of their customer resources and the criticality of treating them with the value and importance something so limited and difficult to win by competition is deserving of.
The result has been years in decline for both K-Mart and Sears, and their value to society as a viable alternative to other similar enterprises continues to decline. This is indicated by losses in market share and revenue that force the two enterprises to merge in the first place. Apparently, when one dinosaur eats another one, instead of getting bigger and stronger, it get so satiated that in its euphoria it forgets the danger of the combination of inattentiveness and tar pits.
Will K-Mart and Sears turn around, or will they follow the path taken by Friendlies, Circuit City, Borders Books, etc. and soon to be downsized, Best Buy? From what I witnessed today, K-Mart and Sears are steaming ahead on the highway to hell. C-est la vie.