Coyote Blog

I am always suspicious when retailers try to pursue a parallel channel model.  Most tend to screw it up.  Office supply retailer Staples gets my screwed-up online retailer of the year award.  We tried Staples online service when a sales person visited us and offered us a corporate discount to try their remote order service.  The first several orders failed to show up on the promised dates, a hardship for a small office where someone often has to explicitly wait around for such a delivery.  Their delivery windows are worse than even those provided by the cable company, promising only to show up sometime between 9 and 5. 

This week, I waited all day for a couple of filing cabinets, which showed up battered and beaten up.   It was clear that the cabinets were damaged just from looking at the boxes.  I hope no one in my company would ever ship something that looked so banged up to a customers without checking on it.  Sure enough, the cabinets were a mess, and I insisted on sending them back.  The driver said, sorry, you already signed for them, I can't take them, call customer service. 

So I called customer service and they did what?  Scheduled another pickup/delivery.  So I again waited all day today for the replacements.  The driver took the old ones, but the new ones were again in beaten up boxes - one had black electrical tape patching it up.  But I had learned.  I said I would not sign for them until I had opened and inspected them.  The driver said I was not allowed to inspect them until I signed for them.  Great.  Well, like an idiot I signed and then immediately upon opening the boxes found that they were both beaten up.  Obviously they had a bad lot of these type cabinets, and I had begged them to inspect my two replacements first before they came out, but no joy.  And of course, the driver would not take them back because ... I had already signed for them.

This restrictive approach to customer acceptance of merchandise, which I would summarize as "you have to accept the merchandise without inspection" stands in marked contrast to how this works in their stores.  I believe that I would certainly be entitled in the store to look at the actual cabinet, rather than the box, before I decided to accept the merchandise.  Heck, I am pretty sure it was my local Staples store that, when they sold me two chairs, unboxed them and assembled them for free.

So tomorrow is yet another visit.  I again begged Staples to inspect the cabinets before they put them on the truck to make sure this third set would be OK, since they obviously were pulling from a bad lot.  The Staples customer service guy said that their warehouse folks don't do that kind of thing.  No shit.

Update: OK, I give up.  The replacements were battered as well.  Why through this no one in the warehouse would have the initiative to check on what is obviously a bad lot they have received from the manufacturer is beyond me.   I have left them on the curb for Staples to get whenever they want them.  They were good about my credit.

There is no doubt that electricity markets are a mess.  Electric utilities have been regulated for so long and in so many ways, and new capacity is so hard to add, the deregulation experiments tend to fail over short time periods for any number of reasons.  In California, what was called "deregulation" never really was such, since pricing signals were never passed on to consumers and therefore never really influenced demand.  In Texas, the areas where my company operates still struggle with deregulation, and we have seen few price or customer service benefits. 

This is not that surprising when you consider other major industries that have been so thoroughly regulated.   Railroads come to mind, for example.  Deregulation occurred thirty years ago and we are only recently starting to see a renaissance in that industry.  Pre-deregulation airline incumbents (e.g. Delta, United, American) are still struggling with open markets.

Mike Gibberson links a pair of court decisions that may set back any progress made in deregulating at least the wholesale electricity markets.  In a series of suits, the State of California is seeking a mulligan, asking the court to rule that wholesale electricity contracts it entered into in 2000-2001 should be voided because the price was too high and FERC did not have the authority to allow blanket market-based rather than cost-based electricity pricing.  And the judges seem to agree:

The panel held that prices set in those bilateral transactions pursuant
to FERC's market-based program enjoyed no presumption of legality.

I don't think there is anything more depressing to a good anarcho-capitalist like myself than seeing the government rule that a price negotiated at arms length by the free will of consenting, and in this case well-informed adults enjoys "no presumption of legality."  If not, then what does?  Is that where we are heading, to a world where no voluntary actions enjoy a presumption of legality?

By the way, one has to remember that this is not a case of an impoverished high school drop-out in East St. Louis signing a high interest rate loan he didn't understand.  This is the case of highly paid electricity executives and government electricity officials signing electricity contracts.  It is as ridiculous to argue that they were somehow duped in buying the one and only item they ever buy for resale as to argue that Frito-Lay somehow shouldn't be held responsible for the price it negotiates for potatoes.  These electricity companies knew they had obligations to supply power at retail at certain rates and failed to lock up enough supply in advance.  Whether Jeff Skilling gamed the short-term spot market is irrelevant - the utility executives were at fault for finding themselves beholden to the spot market for so great a volume of electricity, and doubly at fault for taking this power at insane rates when other lower cost options were available to them (such as cutting off customers on interruptible contracts).

Asymmetrical Information comments on Greg Mankiw by observing:

Harvard scores lowest in student satisfaction *and* enjoys the highest yield (%
of students admitted who attend) of any leading American university. How can the
same institution be so desirable and so disliked at the same time?

The data presented for is for the undergraduate school and my experience is with the graduate school of business, but I think some of my experience can still help answer this question.

At the time I attended, I was sure that the Harvard Business School (HBS) was the best place for me to attend.  I still think that is true.  First, it had (and has) a great reputation with both people hiring for jobs and the general public.  The Harvard diploma has power, power that hasn't lessened even 20 years later.  Second, it had a style that worked well for me personally.  I sat in on classes at other business schools, but HBS classes had an interactive, and often combative, style that I loved and thrived in.  Yes there was work, but the workload never was worse than my undergraduate school.  I would not change my decision.

That being said, while I have showered my undergraduate school with cash, Harvard has not gotten one dime from me.  Because as an institution, it sucked.  It had an incredible arrogance to it, often stating publicly that its customer was NOT the students, but was the businesses who hired its graduates and society at large.  And this was the attitude at the business school, which I was often told was the most student-friendly part of Harvard.  My college roommate Brink Lindsey apparently had a similar experience at Harvard Law, as he was part of a group that founded N.O.P.E., which stood for Not One Penny Ever (to Harvard).

At every turn, one ran into petty, stupid stuff that did nothing to contribute to the educational experience but were frustrating as hell.  The faculty was often arrogant and the administrative and housing staff uncaring. 

At the risk of sounding petty, I will share two examples.  These are small things, but are representative of hundreds of similar experiences over two years. 

• At winter break the first year, we were all given a "gift" of a coffee table book about Harvard.  Then, next spring, we all found a $100 charge on our spring term bill for this "gift"
• My Harvard dorm room had a broken heater in my second year.  It got so cold that ice formed on the inside of the windows.  After weeks of trying, we finally got a maintenance guy to come out.  He set a thermometer down in the center of the room and stared at it for ten minutes.  Then he picked it up and started to leave.  "Why are you leaving?" I asked.  He replied "Because its 53 degrees in here.  State law does not require us to fix the heating until it falls below 50."  I finally had to go to Walmart and buy several space heaters.  Several weeks later I was ticketed by the campus police for having a fire hazard -- too many space heaters.

I do not think it an exaggeration to say that had Harvard scoured every post office in the country for employees, it could not manage to provide worse customer service day-to-day.

And I think this is the answer to the paradox.  If you can tolerate the faculty arrogance, you can get a great education, but Universities are more than just a school.  For most students, Harvard is also their landlord, their only restaurant choice, their local police force, etc. etc.  And for all these other functions, they are terrible.

Up until the last month, I have been very happy with Amazon Prime, the service where you pay $80(?) for a year of free 2-day delivery.  I am sure I have ordered more stuff from Amazon because of it, and I know I order it faster because I don't wait weeks with things in the shopping cart to group shipments.   

However, in the last month, I have had not one but two orders show up in 7-8 days instead of two.  The first was a Batman Begins DVD, pre-ordered to ship on its release date (which it apparently did).  It was shipped USPS, so there was obviously no hope that it would arrive in 2 days.  The second was a new Nikon D50, which was back-ordered for about a week.

I never really got an explanation for the DVD shipment (maybe they don't apply Amazon Prime to pre-orders?), but I did get some explanation for the Nikon D50.  After writing Amazon, asking them why my item shipped UPS Ground with a 7-8 day delivery time instead of 2-day, which I had paid for with Amazon Prime and was listed as the shipment method on the order page, I got this response  (greetings, apologies, etc. omitted):

After your order leaves our fulfillment center, we may use any
appropriate ground or air shipping service necessary to ensure that
your order is delivered within one or two days, depending on the
delivery option you selected.  These delivery options do not
directly correspond to any carrier-branded shipping services.

I have researched the order in question, and it appears your package
will arrive on time.

We understand that customers who select Two-Day or One-Day delivery
want to receive their orders faster, and we will only use an
alternative shipping method when we know your order will arrive by
the estimated delivery date. 

This is obviously not very clear, but here is what I infer:  When the item was back-ordered, they gave me an updated delivery date range, something like "estimated delivery Nov 2-10".  What I infer from this email is that once they give you an estimated delivery date range, they feel like their obligation to ship 2-day is voided.  The only obligation they now feel they have is to hit that date range.  So, despite the fact that my camera shipped on Nov 2 and I paid for 2-day shipping, they feel they are meeting their obligations if it gets to me by Nov 10, the back end of their estimated range.

The conclusion is not to feel sorry for me that I have to wait to play with my new toy, but that this may be the first sign of a program that is being gutted under profit pressure.  When lawyers looking for loopholes take over the customer service and fulfillment department, things can go downhill pretty quickly.  Note that the "est. delivery date" dodge really gives them carte blanche to get out of the 2-day obligation any time they want, since they set the estimates. 

As a note, I tried to confirm my interpretation with Amazon and have been unsuccessful.  In the tradition of making itself one of the hardest companies in America to actually contact, one can't reply to their customer service email so I can't get an easy confirmation or clarification.  I actually got and called their customer service phone number, which you will never find on their site (write this down:  1-800-201-7575).  The person on the other end of the line was useless, not understanding that I wanted a clarification of the Amazon Prime rules rather than some resolution of a particular order.  She couldn't access the emails I had sent to customer service or had received from them, and didn't seem to understand Amazon Prime rules, so she was no help.  The only funny part was that as I kept trying to clarify what I wanted from her, she kept upping the gift certificate amount she offered me as compensation, despite the fact that I kept saying "I don't want money I want to know what the rules are".  I think I ended up with $20 without even wanting it.

Which makes me wonder why I can't reply to Amazon's customer service emails.  I don't have a problem getting customer support via email rather than the phone, but to make this work I really need to keep working through to resolution with the same person, and the Amazon process makes this impossible.

Note that this is the newest in my series of "real-world" small business issues.  Other posts in this series include Buying a Small Business and Working with the Department of Labor

One of the things I did not mention in my series on buying a small business was the notion of complexity.  Our business manages over 175 sites with 500 seasonal employees in 10 states.  I have friends who own businesses that have the same sales, and more profit, from working alone from their home.  As I often tell people, I love what I do, working in recreation and spending most of my time in National and State Parks, but it is overly complex for the money we make.

The one advantage of this is that, despite being a small business, I get to observe business practices in many parts of the country.  And one business-related practice that varies tremendously from state to state is sales taxes.  (By the way, before I bought this business, I was a strong Federalist.  Putting most regulatory power in the states slows government encroachment.  It also limits anti-business regulation, because states know that such unilateral regulation will just chase employment across state lines, as California has found out.  However, having to deal with 10 different tax and regulatory regimes every day is causing me to revisit Federalism a bit).

Anyway, based on this experience, I will dedicate the rest of this post to my observations of the good and bad of state sales tax systems.

Continue reading ‘The Good, the Bad, and the Ugly of State Sales Tax Systems’ »