Sunday, October 21, 2007

Is it possible to run a business without being a total sleaze?

Yesterday, I went shopping for a piece of equipment that costs about a grand. After inspecting the models available from a major department store, I went to a small business that specialized in the equipment. I asked the owner if they sold any items from a well-known brand. He told me there were quality problems with that well-known brand. He went on to tell me:
  • that the major department store I just happened to have been to was selling that brand, but they marked it up SIX HUNDRED TO SEVEN HUNDRED percent;
  • that the models he sold were of such quality that it was difficult for him to achieve a ten percent markup;
  • that all his models were on sale, he just hadn't printed out any of the sale prices.
In my mind, these facts don't add up. The guy way making up lies to me to pressure me into a sale. When the implausibility of all these things being true dawned on me, I got a bit ticked, and resolved to buy off the internet if his brand were any good.

Then I started wondering: is it possible to run a small business without being a total sleaze? My question is purely an economic one: is this type of sales pitch in the long run, economically favored-- will you eventually make more quick sales from idiots than you will lose business from the intelligent and easily offended? Studying the question would make an interesting master's thesis in economics. Say you were to set up two stores at the opposite ends of a town. In one, sell the products at a clearly displayed, no-haggle price, albeit change the price bimonthly to cope with demand & supply. In the other store, adopt our friend's habits: post MSRP stickers on everything, say there's some secret sale price, invite aggressive haggling, and have a schtick that offends the intelligent or flighty out of your store in the first 30 seconds. Then after six months, switch tactics. Which is necessarily better for business?

Thinking about the psychology of the thing, I can easily imagine a business owner or regional manager fearing for their economic life and deciding that the only way to survive is to get aggressive in this manner. I think it's human nature to want to set aside a principle in order to survive-- I think this is why 38% of us openly favor torture in the war on terror.

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