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Interpreting low-cost low-service providers as 'greed' strikes me as naive. How else would you expect a business to cut costs and prices to the bone, other than

Interpreting low-cost low-service providers as 'greed' strikes me as naive. How else would you expect a business to cut costs and prices to the bone, other than by reducing service? Costco, while blessed with a better reputation, is similar. The prices are low in large part because the experience of a Costco store is extremely barebones: limited variety of items, required to buy in bulk, everything is just on the pallets they came on, the store is literally a warehouse with a cement floor, customer service is very limited etc. That's not them being greedy either, it's fundamental to how their business works.

dangus 7y ago
It’s interesting that you bring up Costco because their business model doesn’t quite work the same way. Costco employees are paid very well compared to other retail and warehouse employees. The average Costco shopper is also more affluent than a typical Walmart or Target shopper. Costco customer service is not limited at all. It’s the best in the industry. They have notoriously generous return policies. As long as it’s not electronics, you can return basically anything at any time. The electronics section also tacks on another year warranty compared to other retailers. Many items in Costco aren’t actually generally the best deal around. Again, they cater to high income families. Yes, the low-labor warehouse environment with very few SKUs reduces costs, but it not a low-end experience. Only bulk staple foods are truly great deals, many items in the middle section (home goods) and electronics can be found for cheaper elsewhere with little difference in quality. The analogy you might be looking for is Amazon. They use contracted employees for deliveries and overworked, underpaid non-union warehouse employees. They have very little emphasis on delivering genuine goods and don’t mind selling off-brand stuff as long as it’s the cheapest option. They use market dominance as a replacement for decent service and products: who else can run their own delivery service?
derefr 7y ago
To be clear, it’s not the low-cost part that sounds like greed on the part of the owners; it’s the low-paid employees and worst-rated service that sounds like greed. Those are more often things you see from companies who are “penny wise and pound foolish”; companies like, say, Comcast.
- hnews_account_1 7y ago
  The low-paid employees are the reason they can keep costs so low. This is circular reasoning. While everyone can provide examples of new services that provide similar costs but have happier employees, it can't sustain long term because money is a thing. All the snazzy new services will one day become dominant because they have well funded VC backing and/or actually better service than competition, and then the shareholders will work on clawing back their investment by raising prices / slashing costs etc. As a consumer, I'm no longer loyal to one brand for almost anything (including such essentials as my laptop) because someone will come by and offer me cheaper service, but I don't want to enable the newcomer to take over the market because it'll come back to bite me. But people like me are more discerning than the normal consumer.

dangus 7y ago

It’s interesting that you bring up Costco because their business model doesn’t quite work the same way. Costco employees are paid very well compared to other retail and warehouse employees. The average Costco shopper is also more affluent than a typical Walmart or Target shopper. Costco customer service is not limited at all. It’s the best in the industry. They have notoriously generous return policies. As long as it’s not electronics, you can return basically anything at any time. The electronics section also tacks on another year warranty compared to other retailers. Many items in Costco aren’t actually generally the best deal around. Again, they cater to high income families. Yes, the low-labor warehouse environment with very few SKUs reduces costs, but it not a low-end experience. Only bulk staple foods are truly great deals, many items in the middle section (home goods) and electronics can be found for cheaper elsewhere with little difference in quality. The analogy you might be looking for is Amazon. They use contracted employees for deliveries and overworked, underpaid non-union warehouse employees. They have very little emphasis on delivering genuine goods and don’t mind selling off-brand stuff as long as it’s the cheapest option. They use market dominance as a replacement for decent service and products: who else can run their own delivery service?

derefr 7y ago

To be clear, it’s not the low-cost part that sounds like greed on the part of the owners; it’s the low-paid employees and worst-rated service that sounds like greed. Those are more often things you see from companies who are “penny wise and pound foolish”; companies like, say, Comcast.

hnews_account_1 7y ago
The low-paid employees are the reason they can keep costs so low. This is circular reasoning. While everyone can provide examples of new services that provide similar costs but have happier employees, it can't sustain long term because money is a thing. All the snazzy new services will one day become dominant because they have well funded VC backing and/or actually better service than competition, and then the shareholders will work on clawing back their investment by raising prices / slashing costs etc. As a consumer, I'm no longer loyal to one brand for almost anything (including such essentials as my laptop) because someone will come by and offer me cheaper service, but I don't want to enable the newcomer to take over the market because it'll come back to bite me. But people like me are more discerning than the normal consumer.