Two weeks ago, I went looking for a veritable needle in a haystack. I managed to find the pin by some miracle somewhere within my many boxes. I also pulled out a few other items of interest, including two books I had previously started but never finished. One was the Brothers Karamazov. The other was the biography of IKEA founder Ingvar Kamprad.
I just started another massive novel recently, so I chose to alternate between that and Swedish business acumen before digging into Russian literature.
(I laugh every time I see this so I had to borrow it; please visit Erik Johansson for more great work!)
I think my favorite part in the entire IKEA book is quite early on, regarding the transition from mail order to showroom. This unlikely reversal of trends was critical for a few reasons. Of course people still yearn for the tactile sensation prior to buying some specific goods such as furniture and clothing. Yet it is the opportunity to compare two levels of product that was the key takeaway. Anyone can race to the bottom in terms of price. Ordering by mail or now online without being able to compare specifications or see the product in person will inevitably lead one to choose the cheapest model. And then you will probably regret it when you receive something that falls apart or stops working.
Kamprad’s insight was to simply let people judge products for themselves. Contrary to what some economists would have you believe, consumers chose to pay slightly more for significantly higher quality.
This reminds me of a famous pricing study of the Economist. The publisher sold more subscriptions when they offered a more expensive plan. I forget the exact details, but it was something like print only: $99, print and online access: $149.
Offering both increased sales more than when there was only one price, because buyers were more satisfied in believing that they got a deal. Plus, the publisher had the opportunity to make even more money than intended. This way, producers sell more and may even be able to raise prices in the face of conventional wisdom.
It amazes me that this seemingly obvious rule of economics has not yet been applied across the board, particularly at the supermarket. Slowly grocers have begun to realize that selling organic and/or locally grown produce can be quite profitable. Yet what about other food and drink?
Quick quiz: how many types of red meat are readily available at American supermarkets? Two: beef and lamb. Veal is beef and mutton is lamb, sorry!
(American Bison at Ted Turner’s ranch, photo by Nicolas Boullosa)
What if I want a healthier alternative, such as bison? Or what about the world’s most popular meat, goat? Both are hard to find across America. Yet I am gladly willing to pay another $1 or $2 for bison instead of beef, because by law bison are all raised naturally — grass-fed as well as free of hormones and antibiotics. One only has to watch Food, Inc. to understand the importance of that. That is lost revenue at the checkout counter.
Want to try a different grain beyond corn, rice, or wheat? Good luck.
What about the all-American soft drink, Coca Cola?
Despite inventing the drink, we have the worst variety in the world. Why? Because the falsely advertised Coca Cola Classic has High Fructose Corn Syrup (HFCS) — not sugar like everywhere else on the planet.
Skeptically, sometimes I wonder if the whole New Coke debacle in 1985 was all a charade. Change the recipe so radically to induce people to demand a return to the original that people barely even notice the different sweeteners upon reinstating the “Classic” formula. You get two marketing campaigns for the price of one, appear to listen to the consumer, AND pull a fast one on us by lowering the cost of your product in the process. Sheer brilliance.
So I can’t entirely blame Coca Cola for using corn syrup, even if I detest the move. The devastating effects of our government’s corn subsidies have been well-documented. Corn is cheaper to buy than it is to produce. And yet more poor government policies to benefit Cuba all but ended Hawaiian sugar production. Given that climate, it makes good business sense for Coca Cola to cut costs with corn syrup. However, has it ever occurred to them that perhaps a segment of the population would pay MORE for their product with natural sugar? They haven’t even given us the option.
Despite Coca Cola’s best efforts not to make more money, people are choosing to pay more in certain areas where Coca Cola is imported. Individual 12 ounce (355 mL) glass bottles average anywhere from $1-$2.60. That is a ludicrously high markup of 600% or more compared to a normal six pack! Yes, we re-import soda from Mexico just like prescription drugs from Canada. Except with soda, we pay higher prices. Intentionally.
A few renegade American bottlers use sugar to give customers what they want during Passover to keep Kosher, but I haven’t found it at either of my local grocery stores here in NYC. Therefore, I’m going to make a rare order from FreshDirect while I can. One can only hope that this revolution in business will continue.
I am not asking for Kozmo 2.0. I just want a few more choices. Besides, diversity isn’t just better for crop rotation. It also spurs the economy and tantalizes taste buds.
