Internet Pricing

A.D. Freudenheim, The Editor

I’m no pricing expert, but it seems to me that the world is waiting for someone to come up with a better internet retail model. At the moment, internet access in the average “coffee shop” seems to work in one of two ways: the high-priced service model, as at Starbucks, or the free-and-open model, as with chains like Così and other places, including many independent stores. As much as I appreciate free internet, neither model makes much sense. In fact, the free access approach isn’t even necessarily beneficial as a patron, since it can change customer behavior for the worse.

On the pay-for-use side, the Starbucks model is expensive, especially if you need just enough internet time to accomplish something meaningful, and not so much that it's a day’s investment. Starbucks has contracted the service out at AT&T, which in turn has an aggressive pricing model. I suppose they charge what the market can bear, but in all likelihood this just pushes users towards mobile devices that either have free access because of an existing corporate relationship (as with the iPhone at Starbucks, through AT&T) or use external systems (like the BlackBerry). And this is all fine and well—as long as a mobile device will do what you need at that moment.

On the other hand, the free-at-Così approach represents a lost opportunity. Customers can order a $3 coffee and stay for three or four hours, long after the coffee is gone but while the free internet is still working. Indeed, I have spent a fair amount of time at a nearby Così this summer [side note: get espresso drinks, avoid the brewed coffee] and have observed this behavior first hand. Moreover, at my local Così, the space is big enough that I have seen people eating food from other restaurants, unnoticed by staff, while using the internet. Hmm.

It would make a lot more sense to find the middle-ground of these two approaches: purchase-driven, time-based “token” access. Here’s how this would work: buy anything the store sells, get free internet access for up to an hour; your access code would be printed on your receipt. Want another hour? Buy something else: a cookie, another coffee, maybe even lunch; get another receipt and another hour of access. This would entail a logical recognition that coffee shops are not in the internet business, they are in the food-and-hospitality business. Providing internet access makes good sense from a hospitality perspective, so use it hospitably: as an incentive to food and beverage sales while also avoiding a world full of freeloaders. Moreover, stores could tweak this process during peak hours (like lunchtime), to reduce the available internet duration to a half-hour. That would encourage the hangers-on to hang-on for a reason, while making room for paying customers when someone is just mooching internet service.

Starbucks has sort-of moved to a better, scaled model, via it’s reward card, providing two hours of access per day if you make one purchase per month. There’s another trade-off in here, in the form of all the info you give to Starbucks via the card. But Starbucks also seems to have missed the point: by limiting the customer’s internet access, they’re just driving revenue to AT&T, while doing nothing to incentivize onsite purchases from Starbucks itself—because additional purchases won’t increase the amount of free internet time.

I’d be just as happy avoiding chain stores, but many of my local spots (like Georgia’s) don’t offer internet access at all, perhaps because they are concerned about the costs, or the perception that there’s not much benefit in having a bunch of freeloading internet users around. It’s a shame. Seems to me local cafe culture could really benefit from an overhaul in the pricing models, which would be good for business and good for the customer, too.

STOT

That stands for So Tired of This. "This" being Blogger and the failure to "publish" properly.

***

Based on the web traffic, one of the most popular set of posts I've ever written are the three items about my Kenmore 2-Stage Drinking Water Filter, Model #38461.

The issue was that I wanted to buy it - but that no one at Sears was able to tell me what the model numbers were for the replacement cartridges. Eventually, having posted about this publicly, I got a (nice) response from Sears and the information I needed. I bought the filter, had it installed, and have used it happily ever since.

That was about 11 months ago. Since then, I have been pleased with the filter with the noticeable improvement in water quality. We've used the filtered water for everything from baby formula to making rice to just-plain-drinking. Only now, months later, has the quality started to suggest we should change the filter. (The unit comes with a built-in, six-month timer - but at the six month mark, the water quality was fine, so we didn't change anything.)

***

Like I said, I knew the filter was working. Changing the cartridges gave an additional level of proof. For the last *week* I have wanted to post this item plus a photo of the cartridges I removed from the filter - which showed a terribly dirty, rust-colored sediment cartridge (model #38480) on the left, and a less-visibly dirty "taste and odor" cartridge (model #34373) on the right. Blogger, however, has been having fits and won't actually publish the post correctly - either because of the photo or because of the "labels" - so I am resorting to a more fool-proof method. You can now find that photo here. The "label" for this post? "Shopping."

So, now I can say - with further proof - if you're looking for a good water filter for your sink, this model works well.

***

UPDATE AS OF 16 MARCH:
1. If you're seeing this post, with the image at the top and the "shopping" label at the bottom, that's a good sign. It means the system really is working for me again.
2. As I said before ... if you're looking to publish a blog, well, Blogger still needs some work. If anyone from Blogger is reading this, I am happy to discuss the problems I have faced for several weeks now - which have been resolved, no thanks to Blogger. More on that to come from me shortly.

Land Grab

A.D. Freudenheim, The Editor

Here’s a thought: maybe the recession—and the corresponding impact on commercial real estate prices—will benefit existing and new small and boutique shops in New York City. It’s a situation calling out for a better and more creative approach to business development.

***

The debate over the proliferation of “big box” retailers (and big box banks) in New York is longstanding. I am a proud Costco member-shopper, and patronize Fairway, a big box grocery if ever there was one. While there has been much angst over fair pay and union practices at some of these kinds of stores, including over whether WalMart has a place in New York City, they also often offer legitimate value in terms of job creation and cheap(er) goods. (For two good articles on this issue, see John Tierney’s piece in The New York Times from July 21, 2000, and Virginia Postrel’s article in the December 2006 issue of The Atlantic, “In Praise of Chain Stores.”)

At the same time, small shops and “boutique” brand stores offer an equally valuable shopping experience. Generally, the appeal of both rests less on price point than on the intimate knowledge that owners and employees usually have of the products on sale. And for both, it is (in part) a matter of scale: the larger a store’s stock, the less likely it is that the store’s employees will have great knowledge of each of their products. Likewise, the exceedingly wide range of products available in large stores often precludes stocking the more eccentric, low-sales-volume merchandise some customers may desire.

For example: it seems completely natural to me that the appliance and technology chain Circuit City is now bankrupt. While I am sorry for 30,000 employees who will lose their jobs, three separate instances of terrible service at two Manhattan stores was enough to convince me that this was not a good place to shop. Even if the prices were reasonable, the sales staff was generally not: they lacked in-depth knowledge about all but the most high-volume products, and were indifferent to basic customer service. Confidence-deflating salespeople make for depressed sales numbers.

Contrast the Circuit City approach with that of the average Apple store where you get what you pay for: great products with great service. Everything about the experience—including being able to book a “personal shopper” in advance—indicates that Apple understands that its customers deserve to be treated not only respectfully but with respect for their intelligence. This is, in part, a matter of hiring smart staff and training them properly, but it is also a function of the focus involved in Apple’s product line. A manageable range of products means it is possible for staff to learn in great detail about the items they sell.

The same can be said of other kinds of products and stores. Innovation Luggage, another chain store, has a perfectly fine selection of mass-produced, mass-product bags for the mass market. I have shopped there once or twice myself. But if you want a bag that is more creatively designed, something customized to different kinds of styles and purposes, you have to look elsewhere—like Peter Hermann, in New York, which sells smaller, harder to find brands. My favorite shoulder bag, by Mandarina Duck, cannot be found at most big chains, while the terrific computer tote we bought for my wife a few years ago is a true original: a product of the innovative and artistic Schlepp Berlin.

Let’s not forget bookstores, about which I wrote a few years ago. The closing, in 2006, of the fraternal twin book stores Murder Ink and Ivy’s Books and Curiosities was a terrible day for my Upper West Side neighborhood. Even worse—or perhaps just ironic—is the fact that the store fronts that housed those shops have sat empty since December 31, 2006. Only now, more than two years later, is one of them seeing a new tenant (yet another mobile phone chain). Jay Pearsall, who owned the book stores, would have every right to be angry, and also to revel in schadenfreude at a landlord whose rising rents put Pearsall out of business but also kept the spaces unrented for another two years.

***

My dream of a series of new boutiques and small stores is probably just that, given the state of the credit markets. But commercial real estate vacancy rates are high and rising, not just in Manhattan. If landlords changed, ever so slightly, their perspective on what makes a successful tenant, they might find themselves able to reverse the drain. Landlords could, for example, become limited business partners with their tenants for renewable terms; lease payments could be made based on the success of the business, which would make the success of the business in the best interests of the landlords themselves. If that sounds like a money-losing proposition, ask yourself what sounds better: unrented storefronts for the duration of the recession—or renting out that space, generating some (initially modest) income, and aspiring to achieve higher rents while also contributing to the success and stability of a given neighborhood?

This is not a foolproof strategy, as the closing of the Oscar Wilde Bookshop shows; not every business can be saved, and not every business will succeed. That is not the point. A strategy of seeking to maximize profits by looking exclusively for the largest commercial retail partner is not sustainable; there will never be enough big box partners to satisfy every available rental space. In urban and suburban communities alike, retail diversity is important—there is value to be found in many stores beyond the savings of dollars and cents—and landlords would do well to figure this out, and take advantage of it. In fact, we would all benefit.