Topic: Economics
Why I Hate Best Buy The Economics of Best Buy, Staples, and Circuit Cityby Christopher Espinal
(Conservative)
Sunday, January 6, 2008
I went to Best Buy in Times Square to browse through the PC video game section and look at XBOX 360 titles. It turns out that it served as a great place to understand business economics. Watching the way employees work and understanding their horrible refund policies led me to despise their business tactics.
Firstly, I remember standing next to a woman and a Best Buy employee "assisting" her with computer information. Listening to this naïve women and half educated "computer nerd" converse on system requirements for exceptional entertainment only made me chuckle at the ambiguity of his explanations. He passively forced this poor woman in search of a decent system to trust his word.
All he had to do was use several computer terms and with no depth in detail. She wouldn’t have understood his in depth explanations even if he decided to waste his time.
The employee constantly lied to this woman assuring that his services aim to get the best price for his customers. Actually, from my knowledge of how these organizations work, he has an incentive to do quite the opposite.
These folks who insist on using their help actually receive a percentage of any item they help their customers purchase. Initially this solves principle-agent problems: where an employer can make sure that their employees provide maximum service to their customers. They act nicer and trail their customers to make sure that "everything is okay."
It sure makes them nicer but they have an incentive to do it for your wallet, not to help you. A commission gives them the incentive to help as many people as possible within their eight-hour work days, so they will try to get you to purchase a product as quick as possible at the highest price. So much for that woman’s bang for her buck. I sensed something wrong when he continued to pressure her into purchasing one of two computers, both the most expensive of their horrible selection.
My advice for all you folks searching to purchase big items like computers: get a nerd cousin to build one for you. There is at least one in every family who has such skills. At least for desktops individuals should know that you can almost get better deals when building one from scratch. Custom desktops have much more flexibility when upgrading because one can purchase by the piece instead of having to purchase a whole computer system. Only purchase a laptop if you know for sure you will spend time on the go because these systems cost more and outdate within months.
Secondly, speaking of the horrible computer selections that these oligopolies offer, they usually have a few good looking but overpriced systems aimed at increasing the number of purchases. From their perspective, it helps to have a few systems on display since it requires less shuffling of customers. In other words these guys are not here to help but here to sell so don’t get angry when they sell you crap.
Thirdly, don’t expect the best service and accommodation when you plan to return something. These guys aim at hording the most money possible. If something doesn’t work for your computer, or if they made you purchase software not compatible with your system, they will refuse you a refund if you opened the box. Make sure that when you purchase something that you read the fine print on your receipt because it will bite your bottom if you make the wrong move.
Go ahead! Make your cheap rebuttal by saying that I’m anti-free market. Actually, I believe that I’m pro-free market. These oligopolies didn’t arise from natural conditions. They don’t have full ownership to some resource or a patent on some technologies. Nor is it naturally efficient to have few firms selling computers. Monstrous oligopolies arise from the mere fact that small business continues to wither away. They can’t keep up and must sell at much higher prices than their big counterparts.
All in all, oligopolies feast on the middle man and woman by selling them junk for higher prices because they have market power. They don’t need to give you the best service because more competent firms don’t exist.
Whether small businesses continue to wither away because lobbying efforts stifle true free markets, or because politicians continue to strangle the enterprise system, the consumer suffers. We pay and suffer more. I’m beginning to understand the notion of soft fascism.
Which Presidential Candidate will fix our failing market system?
Update on this Article:
It turns out that I confused Best Buy with a different store....a smaller one that no one knows of. Please take this article as a hypothetical!
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2008 Christopher Espinal, all rights reserved.
Published: Sunday, January 6, 2008
Last modified: Thursday, March 27, 2008
The views expressed in this
article are those of Christopher Espinal only and do not represent
the views of Nolan Chart, LLC or its affiliates. Christopher Espinal is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
"A commission gives them the incentive to help as many people as possible within their eight-hour work days, so they will try to get you to purchase a product as quick as possible at the highest price."
This statement alone proves you know nothing about Best Buy. You are also wrong on other points in this article, but this one statement unto itself was enough to make me realize how much I couldn't trust your opinions. Sorry.
" A commission gives them the incentive to help as many people as possible within their eight-hour work days, so they will try to get you to purchase a product as quick as possible at the highest price. So much for that woman’s bang for her buck. I sensed something wrong when he continued to pressure her into purchasing one of two computers, both the most expensive of their horrible selection."
WOW, Best Buy is not commission. If your going to fire off a "cheap" I hate whatever post, atleast get your facts right.
Now as for horrible return policies, what do you mean? Best Buy actually increased the consumers ability to return/exchange products for the holiday. (Basically anything you purchased from Nov. 1 can be returned 14 or 30 days after Dec. 25, and you can get gift receipts for people that are hard to buy for so they can return/exchange what you purchased for them.)
The only problem that I have with Best Buy is their Gift Card Policies. The person who receives the GC is forced to use it in a certain amount of time or they lose money on the card. That amounts to theft. However, as far as their CS goes, i would have to put up the point of buyer beware. If you can't tell when a salesman is being a salesman, then that is just too bad for you.Â
Posted By: Christopher Espinal
Date: 2008-01-07 12:56:56
Employees at best buy do recieve a "little something" for the things they sell. I know this because I asked people that work there. The same goes for CompUSA and others. This is the same as a commission. Don't argue unless you do your own research and questioning.
I knew that these comments would come up because you all don't understand basic economics. Sure, they may improve refund policies for Christmas time, but in general they have horrible policies. I know because I always see these guys reject refunds for the worst reasons like "you opened it". They can simply repackage, it's not like there is no access for one of americas largest tech stores. Evenso, if there were more competition their policies would be much better because they would lack market power. Learn the basics people.
To say that because I mention commission and its associated incentives I know nothing of best buy is just preposterous. You all probably had great experiences....all of which is by pure chance. Wait untill you see what I mean.
Posted By: Christopher Espinal
Date: 2008-01-08 17:05:41
Yes they do recieve a commission or percentage of what they get their consumers to purchase. I did the research, not you. It's not like I can cite some random person as evidence. I would suggest all of you people to pay attention to the economics of this article. Of course, every single time I use economics it goes way beyond everyone's head. Read principles of economics by Gregory Mankiw. Maybe ya'll can begin to understand my points. My information is accurate. You probably all have great experiences with best buy which shows why ya'll would be so defensive. Happy New Year.
"Employees at best buy do recieve a "little something" for the things they sell. I know this because I asked people that work there. "
In that case, you know NO ONE who works there.
"Don't argue unless you do your own research and questioning."
Don't attempt to tell me what I know is the truth, being an employee for close to fifteen years.
"Sure, they may improve refund policies for Christmas time, but in general they have horrible policies."
Horrable policies designed to protect themselces from scammers, and "customers" who like to rent electronics.
"I know because I always see these guys reject refunds for the worst reasons like "you opened it". They can simply repackage, it's not like there is no access for one of americas largest tech stores."
Again, you don't know anything about Best Buy. To simply "repackage" something as new is FRAUD.
"Evenso, if there were more competition their policies would be much better because they would lack market power."
Just how do you think they got to be #1 anyway? LUCK?
"Learn the basics people. To say that because I mention commission and its associated incentives I know nothing of best buy is just preposterous."
No. I'm saying you are a liar.Â
"You all probably had great experiences....all of which is by pure chance. Wait untill you see what I mean."
And all these good experiences are one of the reason Best Buy is what it is today. Get over it.
"Yes they do recieve a commission or percentage of what they get their consumers to purchase. I did the research, not you. It's not like I can cite some random person as evidence. I would suggest all of you people to pay attention to the economics of this article."
Once again, you are a liar.
"Of course, every single time I use economics it goes way beyond everyone's head."
Posted By: Christopher Espinal
Date: 2008-01-17 22:30:51
Tom: Where do you live. Do you live in NYC? I bet you don't. Things might work differently across different places. No it isn't fraud for some stores to repackage items that are new. What do you think they do when you send the company back something that doesn't work. They fix the little problem and repackage the most old device. That is depending on the item. I know two individuals who get "a little something" by best buy for selling items as large as computers. More and more places are taking advantage of this. It works the same way in CompUSA. That is in NYC. I might have been wrong for assuming that it is the same all over the US.
Best Buy does have market power. Learn some economics to understand what that means. You may have worked there for 15 years but that doesn't mean you know everything else.
"Horrable policies designed to protect themselces from scammers, and "customers" who like to rent electronics."
Oh Please......not when your reciept says that you purchased the item the day before. Other companies have scanning bars on their reciepts just in case. Yes, their refund policies suck. I highly doubt they worry about scammers and people who like to rent electronics. Other stores check the devices before repackaging and refunding. The stores that I'm talking about are the mom and pop electronic stores. And it's legal.
“Tom: Where do you live. Do you live in NYC? I bet you don't.”
I currently reside in Florida.
“Things might work differently across different places. No it isn't fraud for some stores to repackage items that are new.”
No matter where you are, it is unethical and deceptive to repackage previously purchased items and sell them to the public as new; Fraud.
“What do you think they do when you send the company back something that doesn't work. They fix the little problem and repackage the most old device. That is depending on the item.”
If Best Buy sends something back to the manufacturer that is defective, it is replaced with new product. If that product is repairable, it is fixed “locally” and returned to the store it came from to be re-sold as an "open item" product. These products (offered clearly as OPEN ITEM), although discounted below the selling price of a new product, retain the full manufacturer's warranty when re-sold to the next customer.
“I know two individuals who get "a little something" by best buy for selling items as large as computers. More and more places are taking advantage of this. It works the same way in CompUSA. That is in NYC. I might have been wrong for assuming that it is the same all over the US.”
As I suspected, you know a little but assume much when it comes to Best Buy. You’ve gone from “commission” to “a little something” in your explanation; nice back-peddling. Enhanced monetary compensation is against company policy, and can get you termed.
“Best Buy does have market power. Learn some economics to understand what that means.”
I don’t know how much you paid for yours, but it doesn’t take a degree to figure out why Best Buy is the dominating force in CE retail.
“You may have worked there for 15 years but that doesn't mean you know everything else.”
Fascinating how you make snap judgments about my lack of education in every post. More to the point; my education is heavily based in Best Buy, so you might want to think twice about those snappy off-the-cuff comments you can’t substantiate.
"Oh Please......not when your reciept says that you purchased the item the day before.”
If you’d bother to read the back of the receipt, or the ten foot sign inside the store…
“Other companies have scanning bars on their reciepts just in case.”
You get the bar code receipt on your return/exchanges at Best Buy.
“Yes, their refund policies suck.”
Well, that’s more of a matter of opinion, don’t you think? Which national retailer do YOU think has better R/E policies?
“I highly doubt they worry about scammers and people who like to rent electronics. Other stores check the devices before repackaging and refunding.”
That kind of thinking is what we refer to as a LOSS, and it goes directly to the store’s bottom line. Have too much of that, and you’re looking at a new management staff.
“The stores that I'm talking about are the mom and pop electronic stores. And it's legal.”
Really? I thought we were discussing Best Buy. Somehow, I have a hard time strapping the word “legal” to unethical and deceptive sales practices.
Posted By: Christopher Espinal
Date: 2008-01-27 03:28:06
As I suspected, you know a little but assume much when it comes to Best Buy. You’ve gone from “commission” to “a little something” in your explanation; nice back-peddling. Enhanced monetary compensation is against company policy, and can get you termed.
By saying a "little something" is the same as a commission. You get paid for your efforts on top of your salary! Sure, its a change of words but not a change in concept.
Well, that’s more of a matter of opinion, don’t you think? Which national retailer do YOU think has better R/E policies?
All national retailers have crappy return/refund policies. They have market power, they act as oligopolies, they all turn out to have the same refund policies. Why can't they turn into a monopoly: game theory!
That kind of thinking is what we refer to as a LOSS, and it goes directly to the store’s bottom line. Have too much of that, and you’re looking at a new management staff.
There are places that do it right in front of you and decide whether or not something can be returned. The mom and pop shops!
Really? I thought we were discussing Best Buy. Somehow, I have a hard time strapping the word “legal” to unethical and deceptive sales practices.
Yes we were discussing Best Buy. I am simply comparing! These aren't unethical and deceptive if nothing is wrong. Things can be returned to initial companies for refurbishing if something is wrong. Why don't national retailers do this? Not enough competition to provide that kind of extra and great service. There's no incentive for them to do so when they have market power.
I don’t know how much you paid for yours, but it doesn’t take a degree to figure out why Best Buy is the dominating force in CE retail.
It may not take a degree but it does take some learning and reading to understand why companies acquire market power and how they do so. It's not like I just know things out of the blue.
Fascinating how you make snap judgments about my lack of education in every post. More to the point; my education is heavily based in Best Buy, so you might want to think twice about those snappy off-the-cuff comments you can’t substantiate.
If I recall I believe you did the same thing. According to you I had no knowledge of how things work. Talking about cutting off without substantiating! I will check back with my friends to see if I got the store wrong though.
i work at best buy and we are absolutely NOT on comission.
and what you think of "ripping" people off is false. maybe that product that he was selling suited HER needs? everyone is different, so stop thinking about yourself.
and if you were being sold a product, and you thought the sales person didn't know what they were talking about, stop and ask for a supervisor of the department, they know their own deparment at best.
so before you embarass yourself on a public blog, do your homework before hand bud.
Best Buy does not pay employees commission on items. They do have a quota of certain items and sales quotas they have to meet, responding to customer within X number of feet, and service plan sales they have to make or they get fired or demoted.
Please, share this *wonderful* source of research where you claim that Best Buy pays commission. Maybe to store managers, but that's more compensation than commission.
Posted By: Christopher Espinal
Date: 2008-01-28 22:24:09
Jacob,
I may have been talking about the wrong store. I do know that it was one of the big shot electronic stores. I have been trying to get in contact with one of my buddies who work at best buy (the guys who talked about compensation when selling items). If Logical Premise is correct when saying that poeple must meet quotas, it creates the same incentive as paying compensation!
No, I know how to buy a computer and the ones that he was trying to get her to purchase were not the best for her needs. The employee could care less how much the consumer spends: unless they are paid efficiency wages where they may be lenient to the consumer's interest.
Oh yeah....I forgot to ask for the supervisor because I would just love to make this person feel like shit in front of their boss. Not.
No, it's no embarrasment. It's a mistake in information at best. You do it all the time yourself so don't put yourself on such a high pedestal and demean people!
Have I ever said my information is wonder? No. I said that I asked people who I know work at Best Buy in Manhattan how much they get paid. Commission was a part of that.
"By saying a "little something" is the same as a commission. You get paid for your efforts on top of your salary! Sure, its a change of words but not a change in concept."
It is a false statement. One makes a commission on a particular product, or amount of product one is successful in selling. This does not exist for those who sell in Best Buy's sales force, anywhere in the company. I don't know how much simpler to put it, but you are wrong. You can change your words and attempt to alter the concept any way you like, but you will still be wrong.
"All national retailers have crappy return/refund policies."
In that case, I would suggest that you stay out of major retailers. Those policies are there for good reason, and if you don't understand why then you need to be doing a little more research on your subject before you tee-off on it.
"They have market power, they act as oligopolies, they all turn out to have the same refund policies. Why can't they turn into a monopoly: game theory!"
Are you now speaking in favor of monopolies? GAME THEORY? I don't know what game you're playing, but it's your theory here that's suspect. Frankly, it seems like you're talking out of both sides of your...mouth. Best Buy is not a part of some "OPEC" like cartel. More to the point, it could be argued that since the expansion of the Internet, it would make it even more difficult for it to become one!
"There are places that do it right in front of you and decide whether or not something can be returned. The mom and pop shops!"
I'm getting tired of repeating myself on this. It is deceptive and unethical for a retailer to take merchandise back from one customer, repackage it, and then turn around and offer it for sale as new to the next customer. Once that box is sold and removed from the store, opened by the customer, and accepted back by the retailer, it is false and misleading to offer it for sale again, reguardless of condition, as a new product. I don't care if you're Best Buy or the Studio Camera Store in the Bronx; it's FRAUD.
If you would rather buy your stuff from someone who has the ability to make up their own return/exchange policies as the whim hits them, and you really don't care that you're paying new prices for what may well be USED merchandise, then BY ALL MEANS, don't let anyone stop you. Maybe the rest of us would like to know ahead of time what we can expect...those of us who can read, anyway.
"Yes we were discussing Best Buy. I am simply comparing!"
Funny. You didn't seem to be doing a comparison in your original article.
"These aren't unethical and deceptive if nothing is wrong. Things can be returned to initial companies for refurbishing if something is wrong. Why don't national retailers do this? Not enough competition to provide that kind of extra and great service. There's no incentive for them to do so when they have market power."
Do you even understand what you're talking about? When you say "initial companies", do you mean the original manufacturer? Do you believe this happens for free? Do you not realize that manufacturers rely on service centers across the country to help keep costs down and streamline operations at production sources? Companies like Best Buy don't just create "market power" out of thin air, or without the assistance of their partners; the manufacturers themselves. Sorry, but I don't see anyone wanting to take a giant step backwards just to please you. If you plan on sending back your camera, audio receiver, computer or microwave back to the original manufacturer for repairs, then be prepared to wait...and pay. You'd be better of just buying a new one.
"It may not take a degree but it does take some learning and reading to understand why companies acquire market power and how they do so. It's not like I just know things out of the blue."
Could've fooled me...
"If I recall I believe you did the same thing. According to you I had no knowledge of how things work. Talking about cutting off without substantiating! I will check back with my friends to see if I got the store wrong though."
What I said was, 1)"This statement alone ("A commission gives them the incentive...") proves you know nothing about Best Buy." 2)"...you don't know anything about Best Buy" And, comparitively speaking, you have yet to prove otherwise. 3)"Your information is, to say the least, faulty".
There is a big difference in someone having a lack of education, and someone who writes blithely about something they know little about, and expects their readers to accept as fact. I can back-up what I say about Best Buy with 15 years of inside information and first-hand knowledge and experience.
What've YOU got?
- Logical Premise
"Best Buy does not pay employees commission on items. They do have a quota of certain items and sales quotas they have to meet, responding to customer within X number of feet, and service plan sales they have to make or they get fired or demoted."
I'm sorry, but there are no "quotas" on individual employees to produce sales on anything. The requirement is that they OFFER the products and services. You can't be fired or demoted (legally) for not selling x-amount of anything, including PSPs.
Employees CAN, however, be terminated for not OFFERING those products and services.
Posted By: Christopher Espinal
Date: 2008-01-31 01:15:53
"In that case, I would suggest that you stay out of major retailers. Those policies are there for good reason, and if you don't understand why then you need to be doing a little more research on your subject before you tee-off on it." You're right. I never buy merchandise from those stores. I just like to browse. Those policies may seem good relative to their counterparts. I have a problem with them because they can be better, much better.
"Are you now speaking in favor of monopolies? GAME THEORY? I don't know what game you're playing, but it's your theory here that's suspect. Frankly, it seems like you're talking out of both sides of your...mouth. Best Buy is not a part of some "OPEC" like cartel. More to the point, it could be argued that since the expansion of the Internet, it would make it even more difficult for it to become one!"
I see you don't know what is game theory! Talking about not knowing...! Game Theory is a prime explanation why Cartels are hard to manage and the reason why the huge national retailers haven't turned to that kind of market structure. It's not in favor of monopolies or oligopolies. I am actually happy that they are in lock and won't be able to grow (unless reduction of costs due to increases in efficiency).
"I'm getting tired of repeating myself on this. It is deceptive and unethical for a retailer to take merchandise back from one customer, repackage it, and then turn around and offer it for sale as new to the next customer. Once that box is sold and removed from the store, opened by the customer, and accepted back by the retailer, it is false and misleading to offer it for sale again, reguardless of condition, as a new product. I don't care if you're Best Buy or the Studio Camera Store in the Bronx; it's FRAUD."
"Do you even understand what you're talking about? When you say "initial companies", do you mean the original manufacturer?"
Get tired as much as you'd like. It happens and its not fraud. They send items back to manufactorers. They do incur costs but this is a result of being a little guy. That's the cost of not being on the upside. That is the reason why huge market power is not a good thing for consumers. They have to sacrifice in order to stay alive. Not all places do this though but that's why they probably have a higher turnover rate.
"There is a big difference in someone having a lack of education, and someone who writes blithely about something they know little about, and expects their readers to accept as fact. I can back-up what I say about Best Buy with 15 years of inside information and first-hand knowledge and experience."
You assumed that I know nothing of how these things work yet I have friends who work in a best buy in NYC. It's the only in Times Square. Again, I have to get in contact with them to verify whether or not I'm confusing this store with some other one. Of course you would dismiss "what I got" because you think business works the same everywhere. Franchise rules vary across county or state, not nation. I'm not expecting everyone to accept my information as fact. There are no absolutes. I even mentioned the huge error associated with my source. Tom, I'll get back to you if there was a confusion and I will change the article. No, I don't write blithely. I do research for what I write about and sometimes I know information off my head so I don't provide sources.
Talking about writing blithely: do you think all these people understand monetary policy on this site? No, they actually don't but they are talking about things they know off their heads. You should attack them for writing blithely if that's what you're concerned about. You have a right to be concerned.
"Tom, I'll get back to you if there was a confusion and I will change the article". "....I have friends who work in a best buy in NYC. It's the only in Times Square. Again, I have to get in contact with them to verify whether or not I'm confusing this store with some other one."
Thanks for getting back to me, Chris. But, I don't really see it as winning; get getting it right. For facts on Best buy, you can always use me as a source of information.
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2008 Christopher Espinal, all rights reserved.