Wednesday, April 30, 2008

It’s The Consumer’s Fault

Have you noticed that no matter what happens with the economy it is the consumers who are at fault? As the economy slides into recession, the reason given is that consumers are spending less. Consumer spending supposedly accounts for most of the economy and when consumers are not out buying the entire country suffers. When the media reports on the “stimulus” checks being sent out by the government this summer, the question is raised of whether consumers will actually spend the money. A repeated implication is that the “stimulus” plan will fail if people use the money to pay existing debt or worse save the money.

Of course the reason given for the recession is the subprime mortgage crisis. How did that economic disaster come about? Consumers were irresponsible. People bought houses they could not afford. Not enough money was saved for a down payment. People refinanced and took cash out of their homes to spend on frivolous consumer purchases. Banks tried to help people who were poor credit risks by extending credit anyway. Look at what happened. Those people took the money, spent it on consumer goods, and did not pay it back.

In fact consumer spending has been a problem for so long, the banks lobbied intensively for a new bankruptcy law that President Bush signed in 2005. The “Bankruptcy Abuse Prevention and Consumer Protection Act 0f 2005” made it more difficult for consumers to discharge debts through bankruptcy. The banking industry claimed that the law was needed to protect our financial system from irresponsible consumers.

So now in 2008, the health of our financial system depends on consumer spending. Actually people are spending more money than ever today. The problem is that the money is being spent on frivolities such as gasoline to commute to work, groceries to feed the family, healthcare and education for children. Those costs have risen so dramatically in the last year that most family budgets are overwhelmed. Few families ever expected that the gas to run the car would cost more per month than the payments to purchase the car.

Government leaders and the executives of financial services companies keep finding reasons to blame the consumer for any and all economic problems. Perhaps the leaders of these institutions should look more carefully at themselves. Unprecedented government debt totaling trillions of dollars is undermining the value of U. S. currency. The result is that food and energy costs more in dollars on the world markets. Lenders are quick to sell all sorts of exotic mortgages to people with questionable ability to repay. Then the lenders are just shocked to discover that people judged poor credit risks actually are.

Despite all the media hype about a recession resulting from consumers not spending, I don’t think that is the real source of our economic problems.

Joseph Ganem is a physicist and author of The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy

Tuesday, April 22, 2008

How Retail Stores Thwart Price Comparisons

It was a beautiful spring day in Baltimore Saturday. Time to begin the yard and porch cleanup. That required a trip to Home Depot for supplies. Having put all the local hardware stores out of business within a year after arriving, Home Depot is the only choice. The store offers what has become a typical retail shopping experience—disorder in every aisle that appears to intentionally thwart rational buying decisions.

I needed work gloves for outside and reasoned that the garden department would be the place to go. Sure enough there was an entire display rack of gloves. I selected a pair made of canvas with latex dots on the palms and fingers for a better grip. The price of $3.97 seemed substantially higher than I remembered last year. Then I saw I had picked a pair of women’s gloves. In fact the entire rack had nothing but women’s gloves. So gardening is a feminine activity? I never knew that. I must think of a masculine activity that needs gloves.

Off I trekked to the paint department in hopes of finding men’s gloves. Surely painting must be more masculine than gardening. Actually in my house, my wife does most of the painting and gardening. But, I’m trying to imagine how Home Deport marketers might stereotype men and women. Sure enough, the men’s gloves were all in painting. I found the same style and color—canvas with the black latex dots on the palms for the price I remembered—$1.94. In fact, except for the men’s gloves being larger, I could not find any difference in the make or quality compared to the women’s pair for $3.97 in the garden department.

So now I understand why men’s and women’s glove are not sold on the same rack. It would be hard to justify doubling the price for the women’s gloves in a side-by-side comparison. The sex stereotyping is just a clever ploy to avoid putting men’s and women’s gloves together.

Next I needed a new wheel for my wheelbarrow. I had two choices—an air-filled one for $14.99 and a solid never-goes-flat model with no price marked. Not needing air seemed like a good idea. How much more expensive can it be? At the self-serve register it rang up for $37.95. I could buy an entire wheelbarrow for that price. I had to disturb the attendant for the self-serve registers, who looked like he was falling asleep, to have the wheel taken off my total.

I put the items I did buy in my car, but then decided that $14.99 for an air-filled wheel seemed reasonable. I went back inside, found the wheels again in the back of the store, and waited in line at the register. The wheel rang up for $24.00.

“The price is $14.99,” I said.

“That’s not what the computer has.”

“Never mind, I’m not going to buy a wheel.”

Before leaving without a wheel, I went back to recheck the price. This time I read the fine print underneath the large $14.99 lettering. The price referred to some kind of “mat” that was nowhere to be seen. The wheels were on the shelf instead.

When I got home I showed my wife the gloves and asked her how much she usually paid for them.

“Those are about $4 to $5,” she said.

“The women’s gloves in the garden department are about $4. But men’s gloves in painting are only $2.”

“But, the men’s have more fabric.”

“It’s not about the cost of making the gloves; it’s about marketing. The stores know they can get away with charging women more for gloves, so they do.”

My wife rolled her eyes in disgust.

Joseph Ganem is a physicist and author of The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy

Tuesday, April 15, 2008

T-Mobile Rebate Run-Around: Part II

When I last wrote about my problem collecting promised rebates from T-Mobile, the company had assured me that the correct paperwork had been processed and checks would be in the mail. Despite my skepticism, the phone representative confidently stated that all was in order. But this week, a month after that conversation, I spent more time on the phone trying again to coax the promised rebates.

Progress has been made but not easily. To re-cap, on January 5, 2008 I purchased four new phones for $50 each when I upgraded my family cell phone plan. I had been promised a $50 rebate on each once I submitted the rebate form, receipt, and bar codes from the box. In February I received one $50 check and three rejection letters. When I called in February to question the rejection, they reprocessed the paperwork and said the checks would soon be sent. Three more rejection letters came instead. When I called again in March, they repeated the reprocessing of the paperwork. It was the March phone call I last wrote about.

The result was two more $50 checks and one rejection letter. I called this week to recover the remaining $50. But now the story from T-Mobile had completely changed. They refused to issue a rebate on the fourth phone. The reason given is that prior to upgrading my phone plan, I had three phone numbers. Part of my upgrade included adding a fourth phone number. Now T-Mobile claims that the additional phone needed for the new number was not part of the upgrade and not eligible for the rebate offer.

I asked to speak to a supervisor. He listened as I stated the following facts:

• I had been promised a rebate at the time of purchase and the store had issued a rebate claim form.

• I had been told when I called in February that a rebate would be sent.

• I had been assured again in March that all the paperwork had been finalized and a rebate would be sent.

• Only now in April, three months after purchase had I been told that no rebate was available for the phone.

He did not dispute those facts; he just reiterated that no rebate was available.

I asked if I could return the phone and get my money back. He said no.

I asked if I could discontinue the additional telephone line and not have to pay the $200 early termination penalty. He said no.

I said that their business practices were incredibly dishonest. He disagreed by reading to me the fine print on the rebate form I had submitted. It reads:

“No employee, dealer or agent is authorized to make, and no customer is entitled to rely upon, any representation (other than described in this rebate request form) about a rebate or change in any terms of a rebate.”

The call ended, this time, with an absolute no from the supervisor on ever receiving a rebate for the fourth phone.

I find the T-Mobile definition of honesty fascinating. The fine print on the rebate agreement absolves all of their employees and agents of legal responsibility for misrepresenting the rebate agreement. When I submit a rebate claim I agree that no promise made to me will ever be binding. Because I’ve agreed to that condition, no misrepresentation made by T-Mobile can ever violate the agreement. So it is a completely honest agreement.

Of course, this license to misrepresent is only granted to T-Mobile. I am still bound by the conditions I agreed to when I decided to purchase the phone and add the new line, even though their misrepresentation influenced my decision.

Joseph Ganem is a physicist and author of The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy