You’ve Become A Nation of Cheapskates (#GotBitcoin?)
Revolutionary tech brings amazing prices—but something feels wrong. You’ve Become A Nation of Cheapskates
From New York to San Francisco, lunch prices are starting to get ridiculous. Most days you cruise past $13 salads and $14 ramen before landing at a Chick Fil-a or Chipotle.
For example, there’s a company called MealPal, a lunch subscription service. Restaurants offer one dish each day, always $6.39. You’ve eaten kimchi bowls, Thai chicken salads, and just about every sandwich in the neighborhood. MealPal, which operates in a number of large cities, is a lifesaver for anyone with a net worth south of two commas. But you’re $6.39 breakfast burrito is the same as the one on the menu for $11.50.
These “Where’s the catch?” deals are practically everywhere now, each causing you a similar dilemma:
*You take Uber Pools home at night, knowing even if nobody else gets in the car the ride’s still going to be cheaper. Are you stiffing drivers?
*You let MoviePass buy your tickets for next to nothing when you used to gladly pay full price. Will this contribute further to the decline in nonsuperhero Hollywood films?
*You demand two-day shipping for everything you buy on Amazon. Aren’t you destroying the Earth, one cardboard box at a time?
*You use the Blue Apron free trial, cancel it and switch to HelloFresh , then rinse and repeat with Sun Basket and Plated. Can decent, easy food delivery survive?
You can practically subsist on all the handouts, and worrying about this feels like “looking a gift horse in the mouth”. But you’ve seen companies you liked fail because they charged too little, and watched others punish their workers in order to keep running.
What are the costs of this race to the bottom? And how does your behavior change as a result of the deals? Are you spending more? Or spending more wastefully? Just as you’re reckoning with the privacy trade-offs you make when sharing baby pictures on Facebook or searching with Google, these low prices may have costs you don’t see.
Priced To Move
Selling something for less than its sticker price is hardly new. But the tech industry has gone to new lows. You might get an ad-supported music subscription that still gives you the world’s music, a 100-night mattress trial or $50 for referring a friend to MealPal.
To grow, companies need to stand out in some way, said Robert Dolan, a professor at Harvard Business School. “There’s so much emphasis on growing their userbase,” all other considerations fade away.
If a product becomes indispensable, its creator can sometimes raise prices without losing customers. That’s why the prices of Amazon Prime and Netflix have risen lately: They’re betting that because you love two-day shipping and “Stranger Things,” you won’t cancel. (They’re right.)
Larger companies can also afford to make little or no money on some products, betting they will make it up elsewhere.
For smaller fries like your family’s mom and pop business they don’t have a lot of money to lose, this is harder calculus. “Companies are very reluctant to raise their prices, especially in an era where everything you do automatically gets a reaction from the crowds on social media,” said Prof. Dolan. Spotify could become profitable by raising its prices, for example, but “the backlash would be huge.”
Kevin Gibbon, former chief executive of Shyp, a now-defunct clever service for shipping goods, blamed his company’s downfall in part on its inability to shift away from charging a $5 fee no matter what you were shipping. And when MealPal explored raising its price 60 cents per meal, users bristled, says its CEO, Mary Biggins.
Ms. Biggins has been through all this before. As co-founder of fitness startup ClassPass, she witnessed the company grow massively in 2014 because of a $99-a-month unlimited-class offer. It made no business sense—ClassPass had to pay providers full price for every class. But it was the most popular offering of ClassPass until the startup dropped it in 2016, calling it “unsustainable.”
Ms. Biggins says MealPal has been careful to make sure participating restaurants make money. Since they’re offering a single dish with no customizations, and they know exactly how many to make hours in advance, restaurants can easily make a huge number of MealPal meals, she says. Restaurants have told Ms. Biggins that MealPal hasn’t forced them to hire new employees, though she couldn’t say if they have been able to reduce staff.
Uber makes a similar argument. Drivers’ rates, calculated by time and distance, aren’t affected by your fare, says the company. In a few cities, Uber has experimented with raising prices a small amount with few issues. Nevertheless, studies have found drivers make less than minimum wage in some large markets. Surely your low fares play some role in that.
In general, “ consumers have been trained to expect a lot for a little,” Prof. Dolan said. While that’s good in many cases, higher prices do help companies stay in business.
Besides, studies have shown that cheap things turn you into reckless shoppers. You buy things you don’t need, then do a chargeback or dispute when you realize what you’ve done. You juggle your credit cards and rewards programs like a professional circus juggler. You trade gobs of personal info for a week of free meals.
One 2012 study found that by offering free returns, online retailers vastly increased consumer spending. Even when you think you’re getting a great deal, you might consider that you’re actually paying more.
Ultimately, I think the solution is this: Take the cheap stuff while it’s there, just make sure you know who you’re taking it from. If a company wants to pay for you to have a new mattress every 100 nights or a new meal-delivery plan every two weeks, take it—but you should only sample things you’ll actually buy.
At the same time, I think you should start shipping your Amazon orders in a single box, throwing a couple bucks in the tip jar when you pick up your MealPal and making sure to tip your Uber driver.
If all of your favorite companies do eventually go bankrupt, well, maybe others will figure out how to not participate in this mad race to the bottom.
Meanwhile, buy the biggest hamburger and fries you can stuff in your face. It’s the least you can do.