Monday, April 10, 2006

The Right-Sizing of Self-Service

When the retail industry was in its infancy, self-service was non-existent. You told the clerk in Sam Drucker’s General Store (usually Sam himself) what you needed and he went around the store and fetched it for you. You went to a shoe store, picked out the style of shoe that you wanted, and a man in a suit went through a curtain to the back room or climbed a ladder that was on wheels and brought your shoes to you in your size. He even wedged them on your feet for you.

If you went to the lumber yard or hardware store for nails, there was always somebody there to scrape your nails from a bin, weigh them carefully, and put them in a brown paper bag for you.

If you needed to buy gas, driving over a black rubber hose was the signal to the mechanic that he had a customer. He would put down the wrench (where he had been changing the spark plugs or a fan belt on somebody else’s car), wipe his hands on a greasy red rag, and come out to your car. You stayed in the car while he pumped your gas, checked your oil, and cleaned your windows. If you were paying by gas credit card (virtually the only thing bought on credit those days), he would take your card inside, run it through the machine, and bring out a receipt for you to sign on a specially designed clipboard. You kept the carbon copy (a real carbon  copy). The receipt was usually smudged with grease from his hands.

Retail has now turned almost completely upside down. Store associates are there only to stock shelves and take your money. Sometimes they don’t even do that.

At many stores, you scan and bag your own purchases. Shoes are usually bought off the rack. And almost nobody will pump your gas any more.

Retailers have discovered that they can save a few bucks by making the customer do some of the work. And customers have decided that they like the lower prices and increased flexibility of self-service. So it looks like a good match.

But here’s the paradox: Even as we enter a more self-service  society, the largest growing sector of employment is the service  industry. Even as we are charged less for doing somebody else’s work, we are paying more to have other people do our  work.

We pay people to raise our children. We eat out more often, so we pay people to cook many of our meals. We pay people to clean our carpets, mow our lawns, and walk our dogs.

When I make pancakes, it used to be that I added oil and eggs to a pancake mix. Now I only have to add water to the mix I buy. Not only am I paying somebody to pre-mix the flour for me, I’m paying somebody to add dehydrated eggs and oil, too. (Dehydrated oil? Well, you get the idea.)

Heck, when I have Eggo’s for breakfast, I even pay somebody to cook them for me. All I have to do is pop them in the toaster.

It’s called the “Right-Sizing of Self-Service”. In areas where it makes sense, the consumer has taken over services that were previously done by professionals. And in other areas where it makes sense, consumers have allowed new professionals to take over. And we are willing to pay them a premium for doing so. Everybody wins when such adjustments in society are made.

This is best exemplified by studying what happens when I buy gas at my favorite convenience store. I am willing to get out of the car and stand outside in the weather to pump my own gas, wash my own windshield, and swipe my own credit card.

When I’m done, I go inside and pay them $1.50 to fix me a cup of coffee that I could have brewed at home for a nickel.

Everybody wins. The store gets more profit because they hired me to pump my own gas. And the store gets more profit because they just sold a new product to me at a 10,000% markup. I’m happy because my hands now smell like petroleum products and I get to spill hot coffee on my pants at the next stop light.

A free-market economy — like all forces of nature — tends to correct itself in the long run. And just like nature, it works best when it’s left alone.

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