OP is the kind of customer MBA classes have been teaching to suss out and eliminate.

The kind of customer that’s ostensibly high value (repeat/maybe high $ sales) but is actually costing company money because they are so costly to serve.

DJ,

Retailers usually don't sell at 60% markup because it's just not enough margin to keep them in business. Retail markup is usually at least 100%, and often more. (This assumes all things are equal and doesn't take into account "loss leaders" that retailers use to get you in the door. Books very well may be a loss leader for B&N. I'd be surprised if the bulk of their profit didn't come from their little coffee shop, knick knacks, book marks by the register, and other high markup items, and not from books).

Now let's take your example where you believe it would be good business practice for them to sell to you at a 50% discount because you're a volume buyer. B&N buys a book for wholesale and marks it up 100%. Then they sell that book to you for 50% off of retail as you propose. How much is their gross profit on selling that book?

Bear in mind, they also have to pay the employees, pay the rent, send out a special coupon to you in the mail to get your business, they have to borrow money to pay for the book to put it into inventory until they sell it, they have to pay taxes, etc.. How much do you think their net profit is when they sell you a book for 50% off? How much do you think their net profit is when they sell to you at 20% or 30% off? It's a negative number.

de captain:

OK, you've forced me to get out my calculator and do a little number crunching ...

First, I didn't propose that they sell their books to me at a 50 percent discount unless (and until) I had bought 20 books within a 12 month period. This is the "deal" I proposed in reply # 11 of this thread.

<begin>

If Barnes & Noble (or any of the other "Big Box" booksellers) truly want my business, they would make me an offer I can't refuse. For instance, B&N might try something along the lines of:

Dear Former DJ:

We truly value your business. To show you how much we appreciate you as a loyal customer, we are pleased to extend the following offer.

For the next 12 months, buy a minimum of 20 books from us at a discount of 10% off - plus your 10% off members discount - and we'll agree to sell you as many books as you want (past the 20 book threshold) for 50% off. That's half off for each book in excess of the first 20!

Sincerely,

Your friends at Barnes & Noble

<end>

As noted, for any additional books I buy above the first 20, the 50 percent discount would only apply for the remainder of the 12 month period. After the 12 month period expires, if B&N - and I - are so inclined, the process could start over with me getting a 20 percent discount on the next 20 books. The 50 percent discount kicks in on the 21st - and all books thereafter - only after I've paid for the first 20 books at a 20 percent discount. So, to get this "50 percent discount" I have a buying window that only lasts for 12 months. (In practical terms, it's unlikely that I would buy more than five books at a 50 percent discount since my yearly average - over the last 40 years - has been in the 20-25 books/year range.)

Let's take your 100 percent markup (over wholesale) and my 20 percent discount (off retail) and see if it's a negative number ...

Assume B&N pays $20.00 wholesale for a book and marks it up 100 percent. So that's a $40.00 book at retail. I come along with a 20 percent off store coupon. (I'm going to ignore the local 9 percent sales tax since that is roughly offset by my 10 percent off Barnes & Noble "membership card" for which I pay $25.00/year.) I would have to buy just over $275.00 in books to "break even" on the yearly membership fee. That equates to (roughly) 11 $25.00 books.

So I get 20 percent off the $40.00 retail price. That's $8.00 off the retail price. $40.00 minus $8.00 = $32.00. Subtracting $20.00 - the wholesale cost - from $32.00 yields a gross profit of $12.00. Twelve dollars [gross profit] divided by twenty dollars [wholesale cost] is a gross profit margin of 60 percent! So even with a 50 percent discount on (maybe) as many as five books, they would be selling those five books (roughly) at cost - after they've sold 20 books at a gross profit margin of 60 percent!

Even after deducting all those other "expenses" you've cited, (with those sunk costs spread out over multiple book purchases), I seriously doubt if B&N is selling to me at a loss. (Most businesses I've had experience with would kill for a 60 percent gross profit margin.)

I do agree with you that the really high profit comes from the coffee and cookies they sell in the store café. They even give me a discount ticket - to buy a "free cookie" in the café - when I'm paying for my book(s) at the cash register. Of course, being the "cheapo" that I am, I hand the cookie coupon right back to the cashier.

grizy:

I wonder if there's a chapter in the MBA "Worst Possible Customers" textbook entitled: "Avoid Poker Players. They're Terrible!"

Mike Sexton revealed in his book "Life's A Gamble" that Ruth Parasol, the lady who owns Party Poker, told him that poker players are the most difficult to negotiate (and make deals) with.

DJ,

You should open a retail store, you'd make a killing with your plan.


You should research how to calculate gross profit margin. Also, local sales tax and your additional 10% off don't just "offset each other".

I'm obviously being trolled, but you also can't just put all of the operating costs I stated in quotes as "expenses" and hand-wave them away as sunk costs.

The average brick and mortar retail store has labor costs alone that run as high as 20% of revenue (probably considerably higher for customers like you). That's labor alone. Add the rent, the marketing, shrinkage, dead stock, insurance, cost of money, and on, and on, and on. How much do you think they're making now on a book they buy for $20 and sell to you for $32? (completely ignoring your sales tax/discount offset nonsense)

There's selling to you at a loss at any discount, let alone a 20% one, let alone a 50% one. The data is there in black and white. The notion that they're making a profit at a 20% discount lives purely in your head; it has no attachment to reality.

Selling to customers at a loss is bad business unless Wall Street capital backs you and have other avenues of profit (Amazon has AWS for example). The end.

ToothSayer, de captain:

I suppose we'll just have to respectively disagree. If it were, in fact, true that B&N is selling to me "at a loss," it would make more sense for them not to sell to me at all. (I'm sure I'm not the only customer receiving those 10 and 20 percent off store coupons.) Also, I've mentioned this previously ... There are numerous brick and mortar sellers - not to mention independent booksellers - who do not enjoy the economies of scale enjoyed by Amazon and B&N. These independents, many of them, are profitable in a very competitive market. They have employees and various & sundry costs too, yet somehow they've managed to survive and thrive against the two 800-pound gorillas in the bookselling business.

I freely admit that I'm not an accountant, a Harvard MBA or a Wall Street genius, but it has always puzzled me how I can buy books and DVDs from McKay's up in Nashville for a fraction of what I would pay at Barnes & Noble. Maybe the problem is that only the nouveau riche can afford a $40.00 "Criterion Collection" DVD. I suppose B&N's misfortune is that there just aren't enough of those folks around to keep them profitable ...

The coupons are part of their marketing budget. That does not mean that selling everything at a lower profit margin is a viable business strategy.

How do you know that these independent bookstores are profitable and thriving?

Let the record state that OP didn't share a Forbes article but blog post hosted by Forbes. Forbes neither vets nor associates itself with the content held within, they just want the free pageviews from crowdsourced content.

Anyone who spends 15 minutes on the application process can start posting blogs there too.

I'm with Toothsayer on this one.

It's also important to note that 60% markup isn't aggregious, it's to be expected when you are serving a specific geographic region that isn't scalable. That one bookstore can't sell tens of thousands of copies, they'll be happy to sell the 2 dozen they order over the course of several years. You can't be both a warehouse and showroom for items that could sit there for years and charge less while being a viable business.

I guess we should start picketing restaurants for charging 5x+ the cost of food too?

Amazon and Perot were in highly scalable fields where you could operate on volume not margin. Meanwhile, if IBM started dispatching sales reps and technicians to each and every business they offered unique and tailored solutions at less than 20% margin, they would have gone out of business. Perot didn't find a problem with IBM's business model, he found a new opportunity that didn't fit into the mold within which IBM operated.

This goes back to Henry's point a while back (discussing Groupon) that large discounting is generally a terrible idea for a business. Several reasons:

1. You attract the kind of customer you don't want - bargain shoppers, hagglers, people who use up sales staff attention and time and who are nearly impossible to upsell. The customers who net cost you money.

2. Your non-discount-paying existing customers, who would pay full price otherwise, both get the discount and get used to discounts.

This discussion brings into focus the fact that our free enterprise system is both a symbiotic relationship, (i.e. buyers and sellers need each other in order to survive), and, at the same time, a confrontational relationship. It's clear to me, from some of the comments in this thread, that my idea of a "good customer" is not in lockstep with what a standard issue MBA would consider a good customer. Whatever the case, I've learned something from reading all these comments. Hasn't changed my mind, but I've learned something.

BTW, I'm sending a communication to one of the principals at Elliott Management - the new owners of Barnes & Noble. I'm specifically asking what changes the new B&N CEO, Mr. Duant, plans in the area of customer discounts and promotions. (This is not the first time I have written to a CEO.) If I receive a response to my inquiry, I may post it here.

There was a time period when Barnes and Noble would order whatever book you wanted and you could pricematch to multiple online retailers, including Amazon. I still rarely bothered because Amazon was cheaper with no sales tax and I had to wait X days either way. I did my research online so I just placed my order online instead of going to B&N to place the order. My point is that B&N did try a lot of things.

There is a B&N near me in NYC and it is becoming a gift shop with candy, board games, etc.

I've been thinking about online vs B&M and at the end of the day, I think it's a question of the American middle class getting squeezed. No money = no retail therapy at the mall. Sears and Macys are dying, but Dollar Stores are thriving.

My Latest "Shopping Experience" at Barnes & Noble ...

After what happened this morning, maybe Toothsayer, ahnuld, de captain, and grizy are right: Maybe Barnes & Noble considers me an undesirable PIA customer they would rather "... suss out and eliminate" rather than attempt to sell.

In the past few days, I have become very interested in buying a bridge book on the "Standard American" bidding system. (Standard American is a bidding system widely used by bridge players in the United States and Canada.) So I did a query on B&N's web site and found this book.

https://www.barnesandnoble.com/w/sta...=9781412020633

I was so interested in this book that I was willing to pay the full [indicated] $21.56 price - disregarding any [possible] "store coupon" discounts. (I wasn't going to "haggle" over the price since I wanted this book bad enough that I was willing to pay their price - despite the fact that this same book is selling for $15.xx on Amazon.) So I went to my local B&N store with the title of the book - and the book's ISBN number - written down on a sheet of paper.

The assistant store manager, a lady who has seen and dealt with me before, was on duty. She was breaking in a new employee, so she directed him to look up and query the book. She even commented: "Oh, he always writes down what books he wants - makes it easy!" then proceeded to try and talk me into buying a bunch of books they have on sale. (B&N has a "Book Haul" going on this weekend. They appear to be trying to get rid of a massive overstock of books nobody is buying.) I ignored her entreaty since I was only interested in the bridge book.

Since this was a "Print on Demand" book that they did not have in the store, I would pay for the book (in advance) and they would send it to my Post Office box address. (We have followed this procedure several times before with other POD not-in-the-store internet books I have ordered.) The new employee prints out the order form and I'm off to the cash register. That's where things got interesting ...

With a 10 percent "Member" discount, (i.e. $2.16), deducted from the $21.56 subtotal, I expected the [adjusted] subtotal to be $19.40 before the 9 percent local sales tax of $1.75 would be added yielding the final sale price of $21.15. I was a bit surprised when the sales clerk informed me that my total was $23.50! I know many of you will not haggle over a $2.35 overcharge, but I will ...

I had laid my Member Card on the counter, tapping it to make sure the cashier noticed, so I asked her: "Where is my 10% members discount?" Another customer was waiting behind me, so she addressed the assistant store manager saying: "You handle this and I'll take care of the next customer." The assistant store manager looks over my order form while I'm insisting - a bit emphatically - that she show me where my 10 percent members discount is being applied? She tells me: "Well, this is an internet book - not an in-store book - so the members discount doesn't apply." While the other customer looked on bug-eyed, she asked me: "Do you want to continue?" to which I responded with a firm "No!" I turned and walked out. No sale = zero profit.

If it is indeed true that the 10 percent "Members Discount" does not apply to Print-on-Demand not-in-store "internet" books, (advertised on their web site), there must have been a recent change in B&N policy. Last month, July 24th to be exact, I bought another POD internet book, (i.e. Becoming a Bridge Expert" by Frank Stewart), from the same store.

https://www.barnesandnoble.com/w/bec...=9781894154277

The transaction details from the sales receipt for that purchase read as follows:

Becoming a Bridge Expert
9781894154277* T1
(1 @ 25.95) Member Card 10% (2.60)
(1 @ 23.35) Item Cpn 20% (4.67)
(1 @ 18.68) 18.68

Subtotal 18.68
Sales Tax T1 (9.000%) 1.68
TOTAL 20.36
CASH 21.00
CASH CHANGE 0.64-

MEMBER SAVINGS 2.60

Over the past two weeks B&N has lost approximately $100.00 in [potential] sales due to an inability to reach an agreement and/or confusion with respect to their own policies. It really hurts to feel that you're not loved or appreciated. (This is the point in this tale of misery and woe where you should all be laughing ...)

Stop bothering these people or stop trolling us.

It's more likely that the clerk incorrectly gave you a discount last month when you bought that other book (or knows you and didn't want to deal with your tantrum).

That was an incredibly long write up just to say that you're pissed you didn't get something you weren't entitled to. You seem unable to grasp that B&N doesn't want to sell to you at a loss.

dj, at the beginning i was on your side but just felt you were naive about the realities of doing business

but after reading your update...

that's some truly childish and entitled behavior... you make me embarrassed to be white

tldr: price sensitive consumer actively ignores the cheapest and most convenient option, instead goes out of way to buy the more expensive option & opts out of sale because of price.

At this point I suspect DJ doesn’t actually care about the differential. He likes the idea he’s sticking it the big box store by forcing them give him discounts.

Customers like him are why BK has a 10% discount “membership” card (right play for BK is to hike prices by 11% then give DJ the 10% discount) and why JC Penny reverted to the constant sales model after an experiment with honestly low prices (40% off 100 instead of just 60 for example.)

No, grizy - this was not about "sticking it to the big box store ..." or being unhappy because I was not getting a store discount coupon. In fact, I made it clear in my last post - which seems to have been ignored - that I was very willing to pay the full "advertised" web site price (for this purchase) without any store discount coupon. (When I approached the assistant store manager, I handed her the sheet of paper and requested that she query the ISBN. There was not a single word about me wanting any additional "store coupon" discounts.)

The problem occurred when they refused to deduct the normal 10 percent off "Members Discount" which every B&N cardholder is entitled to. (To get that "automatic" 10 percent off on each purchase, you pay B&N an annual "membership fee" of $25.00. This annual $25.00 membership fee entitles you to the discount. This is not a case of me "demanding" an unreasonable discount due to some sense of entitlement. They were denying me a benefit for which I have paid!

Why they did this, I don't know ... It could have been confusion or a lack of training on the part of the assistant store manager or the cashier, but I doubt that as they [both] have been there for years. It did irritate me (a bit) that I wasn't getting a benefit for which I have paid. (There's a possibility of a recent change in B&N policy regarding in-store orders of POD "internet" books, but if that was the case, why didn't B&N send an email alert to all their members notifying them of such a change and/or post notice of such a change on their web site?)

Rather than argue or haggle with the assistant store manger, I chose to walk. I will not accept poor customer service. It's that simple. If that makes me a PIA "customer from hell" then so be it.

JFC

It's right there in their terms and conditions

You weren't entitled to ****. They mistakenly gave you a discount the last time ( or just wanted to get rid of you).

former dj, i honestly think you should go back there and apologize, bring them some flowers for the counter or a gift certificate to treat themselves with donuts (don't bring anything edible, they'll just throw it out when you leave - too many crazies out there)

you were a dick, you wasted their time, you made someone with a bad and miserable job even more miserable - you spread your pain and sorrow unto others - now go repent

rickroll:

My goodness, I think you're right. I am overwhelmed with a tremendous sense of guilt and remorse. I'll be going to morning mass to confess my sins and beg for forgiveness - right after I convert to Catholicism.

The only way I can think of repenting is to commit suicide by slitting my wrists inside a Barnes & Noble store. Oh wait ... On second thought that may not be such a good idea as I wouldn't want a B&N employee wasting their valuable time cleaning up all the blood.

de captain:

Or maybe they "gave" me a discount because I recently bought four software books (in a single purchase) which came to a total of $143.00 - after the 10 percent Member Discount. Yes indeed, I am a truly "undesirable" customer.

It's obvious that cheapskates like me are why Barnes & Noble is struggling.