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Regulation By Market

March 1, 2012, 10:46 am

Best Buy is apparently increasing its customer return window from 14 days to 30 days.

Why?  This certainly costs them money, not just from lost revenue but from the cost of restocking and returning to the manufacture (not to mention fraud).

Are they doing this because they are good guys?  Hah.  Do you really expect goodwill out of an electronic retailer?

They did it because they felt they had to.  As the top dog in dedicated electronics stores, they are constantly under competitive assault.  They are the reference point competitors start from.  Wal-mart attacks them on price.  Amazon.com attacks them on price and convenience.  Smaller retailers attack them on knowledge and integration services.  Everyone attacks them on the niche details like return policies.

Best Buy did this not because they wanted to, but because they felt they had to under competitive pressure.  The accountability enforced by the market works faster, on more relevant variables, and far more powerfully than government regulation.

When the government does regulate variables such as this, such regulation often actually blunts the full accountability of the market.  Retail laws in many European countries set maximum hours and discount levels, protecting large retailers like Best Buy from upstarts trying to provide a better of different service.

Tags: , ,
Category: Capitalism & Libertarian Philospohy
  • Mike S

    Provide a better...? I HATE CLIFFHANGERS.

  • caseyboy

    Why you, you, FREE MARKET CAPITALIST.

  • virginia frank

    Return policy matters because manufacturer's customer service is awful. Last time I bought a printer from Best Buy, my plan was to bring it home, set it up, and if it didn't work immediately, rebox it and return it for a full refund (no restocking fee). Best Buy offered that option.

  • Mark2

    Do they still charge a 20% restock fee? That really annoyed me (As well as the super hard sell for the enhanced warrantee)so I have stayed out of their stores.

  • Mesa Econoguy

    I, too, eagerly await the cliffhanger.

    This is the fundamental crux of leftist economic ignorance.

    Much of the right is also unaware, however at least they are willing to give mr. market a chance, or posture that way anyway.

    This is how the left thinks markets should work:

    Isn’t basic dental service (routine cleanings, check-ups, etc.) a cost-effective preventive measure? It certainly prevents serious and costly disease. According to the USPTF’s grade definitions, a preventive measure will receive an A or B rating if there is at least a “moderate certainty that the net benefit is moderate to substantial.” The NPR report and the Pew Study on which it’s based suggest that routine dental services would surely earn an A or B rating. If they’re so designated by USPTF, then it would seem that employer-provided insurance policies would have to cover them.Perceived injustice A receives government protection, and subsidy, mandatorily.

    “So what?”, you ask. Why would it be a bad thing if health insurance routinely covered dental procedures that would prevent serious ailments down the road? More people would then take the cost-effective precautions, thereby reducing the overall cost of health care.

    ...

    As economist after economist after economist explained in the debate over the Affordable Care Act, a primary reason for spiraling health care costs is the prevalence of generous third-party insurance that covers almost everything and thereby decimates patients’ incentive to shop on – and thus providers’ incentive to compete on — price. Expanding this pernicious dynamic into the realm of dental services would be disastrous for all except dentists.

    [ http://truthonthemarket.com/2012/03/01/is-dental-care-a-preventive-measure-health-insurers-must-cover-lets-hope-not/ ]

    economic FAIL

    buncha fuckin morons

  • tomw
  • tomw

    rats.
    Wanted to add to the above, but return key posted...

    The counter point to the article, by Best Buy CEO:

    http://articles.businessinsider.com/2012-01-06/strategy/30596693_1_business-model-stores-cash-flows

    You tell me...
    tom

  • Hasdrubal

    Mesa Econguy: Maybe I misread but where's the econ fail? (And I don't know where you got the idea the TotM guys are on the left. They were the first people arguing in favor of the ATT/TMobile merger as a procompetetive action, for example.) A fixed or 0 marginal cost will lead to higher consumption, that's pretty obvious and has been found to apply to healthcare as well. Or, are you saying that forcing insurance to cover basic dental care will be an economic fail if they're trying to use it to reign in costs?

    Also, the Truth on the Market post was about regulation driving up prices by forcing people to buy even basic dental care from full DDS/MD dentists rather than getting regular work done by dental technicians.

  • Mesa Econoguy

    ToTM is not a leftist blog – you misread.

    The economic FAIL is that the left does not understand economics. Obamascare is their crowning achievement.

    They would have Best Buy mandated to provide such services as an expanded returns policy, which would not work.

    In the case of healthcare, they are attempting to top-down regulate/mandate every facet of service delivery, and in turn have created a scenario where costs will rise, not fall, by insulating customers (and competitors) from pricing and competitive forces, resulting in overusage and shortages.

    I shouldn't have to explain this.

  • markm

    Consider this: why doesn't your auto insurance pay for brakes and tires? There is no reason for other routine maintenance to be included in "insurance", but keeping these items in good shape reduces the risk of collisions, which insurance does pay for. It seems fairly obvious that what I pay for these costs much less than the added risk of a collision on bald tires or bad brakes times the average cost of a collision. So why don't insurance companies encourage you to maintain them by paying for brake jobs and new tires when needed?

    The answer is that if insurance was paying, the cost would NOT be the same. I take jobs like this to my brother in law; if no relatives were in the business, I would shop for the best price for good-enough service. But if insurance was paying, I would neither expect a family discount nor price shop. Garages could double their rates - it's not my money. And they could keep on doubling them every few years.

    So the insurance companies would have to institute price controls of some sort. I would have to take my car to one of the garages on the insurance list, or risk having to pay much of the bill myself. And the garages would see no reason to compete on customer service; if I had to wait half a day in a dingy lounge before they even pulled my car into the garage, well, I'm not the paying customer.

    And yet, costs would still increase, requiring higher insurance rates. To get paid at all, the garage would have to fill out forms and convince some clerk, who probably does not know the difference between a box wrench and a screwdriver, that the brake pads really were worn down to the point that replacement was necessary. Their prices would have to increase to cover the cost of the office staff. And the insurance rates would rise even further - besides the risk of collisions, now I'd be paying for their extra office staff and the garage's extra office staff.

    So what happened to make medical "insurance" cover all sorts of routine and predictable expenses, to the point that these probably outweigh the exceptional and unpredictable risks that true insurance is for? Government interference with markets. First, during WWII companies were not allowed to raise their wages enough to compete in an extremely tight labor market, but fringe benefits were not regulated. So they not only gave out medical insurance, but they covered many things that no one buying insurance in a free market would find it made sense to pay someone else to pay for. After the war, there were many people who had become used to the government paying for every medical procedure - not just the civilian employees of large corporations, but also the returning veterans. So medical insurance was made tax-deductible, and for companies large enough to negotiate for better rates, it often would attract more employees - especially stable, responsible, family men - than adding that money to the wages would.

    And at that time, it did not cost that much. It takes time for the full economic impact of third-party payment to make itself felt...