Archive for January, 2009

Circuit City and the Psychology of Liquidators

Monday, January 19th, 2009

Yesterday I went to Circuit City. All of their merchandise has been turned over to a liquidator and so I thought, especially looking at the huge line to get in, that there must be some good deals inside. I was wrong, but the experience wasn’t a total loss.

I observed the interaction of the person that seemed to be in charge of the liquidation and the people who were eager to find some good deals. Something struck me as odd right away as I was standing in line, but I wasn’t sure until later what it was. Once I got inside after waiting half an hour, I noticed that there weren’t that many people inside the store. The prices listed on items were fairly good, but not that great. I noticed that some people felt some obligation to purchase something after waiting in line so long (even if it wasn’t a great price). I also felt that there must be some deals worthy of purchase. I wanted a new wireless router and I also needed a spindle of compact discs. The prices seemed pretty good until I got to the register where I learned that they weren’t honoring any of the prices listed on the merchandise. Instead they were taking ten percent off of the MSRP. Of course almost no retailer sells this type of merchandise at the MSRP so in many cases the items were actually overpriced and not at all on sale. Still there were people who purchased items (especially if they brought children with them). The items tended to be small or something that they were probably going to purchase anyway. I did hear one lady though commenting that she had paid a lot more for a similar HP laptop as one that was in the store. I asked her about it and soon came to understand that she didn’t really understand how laptops were priced or the differences in the HP she bought and the one that was in front of her in the store. I can guarantee that what they wanted for that HP was way too much, especially given that if it had a problem she would have no support from the store she bought it from.

After I got home I did a little research into other peoples experiences and found that the liquidations of both The Good Guys and CompUSA both had striking similarities.

So here’s the take away from what I learned…

  1. These liquidators are employed by bankruptcy trustees to get the maximum value possible for all of the remaining inventory.

  2. The liquidators don’t care about customer loyalty because all sales are final and you probably won’t be coming back.

  3. The liquidators will often employ whatever tactics psychological and otherwise to get the most money that they can out of as many people as they can. This in my opinion is why they often wait for a line before opening and try and maintain that line to create hype. Having waited in line also gives people a feeling of having a vested interest in purchasing something after investing so much of their time waiting to get in.

  4. Liquidators almost always raise the price to full MSRP which is way too high and take ten percent off per week as time allows until the end of the liquidation.

My conclusion is that you shouldn’t waste your time even looking at these liquidation sales until they are almost finished. Then you can pick over what’s left and see if a really great bargain missed the mobs of bargain hunters that mostly overpaid for what they purchased.

The other thing to keep in mind is that since all sales are final, if you get your item home and it doesn’t work then you’re probably out of luck. You might have even purchased something that appeared to be new but was actually previously returned. In any case you have little recourse but to try and deal with the manufacturer when possible. If you think about all of the potential hassle and the fact that you might not be getting a good deal anyway, the bargains really don’t look so great after all.

Movements, Labels, Dogma, and Emotional Contagion

Wednesday, January 14th, 2009

We human beings are very interesting creatures when we’re placed together in groups. We can do great things or very bad things. We can conquer polio or after a sporting event (as happened in Tuscon Arizona among other places) we can overturn cars and set them on fire.

The psychological element that allows this behavior (both good and bad) is called emotional contagion.
Emotional contagion is the process that occurs when we catch other peoples emotions and mimic their behaviors. A large part of our culture is created by it. Think about it, where did the stereotypical “Valley Girl” come from?

We should recognize the influence of emotional contagion. Sometimes it’s a very good thing, but sometimes it can be extremely destructive. Movements almost always cultivate emotional contagion through the use of labels and dogma. People get caught up in the propaganda that ensues and are no longer able to think logically or rationally.

Often organizations use labels to attack enemies. The Church of Scientology for instance labels its enemies as “Suppressive Persons”. These people are considered very bad. In politics labels are often wielded without regard to their true definitions. Conservative, neocon, liberal, communist, capitalist, and socialist are all often used by political movements to attack members of opposing movements.
Often a label that the particular group in question finds offensive will be placed on a proposal, person, or another movement. The placement of this label then will cause the groups members to disavow all logic concerning what has been labeled because of the association that is placed on it.

While I believe that its okay and sometimes great to get involved in movements, I strongly believe that we should not throw away our ability to question and critically analyze ideas and concepts. This is exactly what people do though. The label socialist can be slapped on something and suddenly it’s terrible. People often don’t realize that we are a socialist democracy. Yes we have lots of social programs in place. Think about libraries, fire departments, the FDA, and the USDA. These are all things we do together as a society. These are all socialist. The label though means nothing by itself. After all, if everyone started calling purple blue, would blue change or just our name for it. It’s the substance of what we do that really matters, not the movements, labels, dogma, and emotional contagion that surround what we do.

Obama Needs Our Support!

Wednesday, January 14th, 2009

I have noticed that President Elect Obama has been making changes to his proposals for congress that I am not terribly excited about. We are facing what could turn into possibly the worst economic crisis in history. The great thing is that we can avoid it with swift action. I think Obama is ready to enact the necessary actions to ensure a strong recovery and avoid a depression. The problem is that congress is not 100% with him. Whatever he submits to them must get passed and he knows that. That’s why I believe that he may not get exactly what he would like.

The first issue that comes to my mind is tax incentives versus Bush style tax cuts. Tax incentives can spur additional spending in a very large way. We need to look at what will produce the biggest bang for the proverbial buck. Things like tax cuts on dividends produce very little economic stimulus for each dollar taken from our nations tax coffers.

Things like helping small businesses by allocating more money for the Small Business Administration is a great step in the right direction. How much money will a small business that is just getting started spend? They will spend a lot. They will also put most of their earnings right back into the community. They need all kinds of services from janitorial to accounting. These services that they utilize will often come from their own communities. This in turn will foster more economic exchange.

Green jobs are another area that can foster spending. I really do agree with the British economist John Maynard Keynes on quite a few points. Economy is all about the exchange of money, goods, and services. When that flow gets interrupted then we have problems. This means that in some way money has to be spent. If it is saved or horded then that is bad news for the economy. Of course if we consume way to much then that can be bad for the environment. That’s what’s so great about green jobs. They stimulate the exchange of money while at the same time doing something good for the environment instead of wreaking it.

Implementing many of the strategies necessary for a prosperous economy will take a great deal of cooperation. I believe that Obama is ready, but if congress is not then we could be in very serious trouble. That’s why I urge you to start talking to your congressional representatives and encouraging them to pass legislation that will come from the President’s desk. They must think big, creatively, and execute efficiently.

There’s just one problem with this. I haven’t known congress to perform in such a manner in my lifetime. This is why we have to push them. Without pressure from us, congress won’t do what is needed, and we could end up with the worst economic crises in our nations history. The choice is really ours. We can encourage our congressional representatives to stimulate economic activity and have a prosperous nation or sit back and just not get involved.