Tuesday, July 6, 2010

Just my $0.02

Today the post office announced it is increasing it's rates. Letters will be $0.02 more per stamp.

Considering all that the Postal Service does and how quickly it will still be used and will just be rolled into the standard "yeah, well" view of life. The principle of it is starting to bother me. Basically they are incrementally being used less for letters. E-mail and online bill payments. They've made a great move with the standard boxes and rates especially in the current era of E-bay and Amazon.

But I'm not sure I'm seeing great improvements. It should show up in better efficiency. It goes to show a basic principle of costs and inefficiencies creeping in when there is no downward pressure. Simple competition forces.

A few months ago our furnace quit working. I called the folks who installed it 3 years ago. Back then they were a family owned micro-chain and did a quality job. Now they are Franchised with a national network. $45 to evaluate that the blower motor died and it would be a flat rate $900 to replace. A quick internet check found the motor for about $300 at a few places and it is fairly easy to install. I chatted with the owner for about 45 minutes and listened to him outright lie to me about the quality of the motor I could get, the complexity of the furnace motor and various other lines. As part of my job I fight for good pricing on motors and specifications. He would have been better off saying "yeah, we're just trying to shellac you for the difference". It turned out to be a warranty item.

A mom & pop or family business tends not to shellac you for $900 total; they'd charge you for $450 and cover their costs with a nice set profit. Instead the national chain with flat rate pricing is breaking the system. Bad pricing (doesn't understand the small town), bad customer treatment, and a bad reputation for the business (I will never buy from Schnieder, or the now 1-Hr Heating & Cooling).

I like my mom/pop shops. We've worked to buying local foods (usually pizza) instead of the mega chains. We avoid wal-mart where possible. I like my town, I want it to stick around.

So there's a line to walk; a paradox.

Competition is generally good for pricing. A mom/pop garage or plumber will be cheaper and generally better quality than any national chain. 10-12 plumbers is great for a town, 1 plumber will leave you getting hosed.

Then there is the other extreme seen in Walmart. Walmart sells cheaper junk than the 5&10 shop, but it's only thru the national leveraging (and China) that they are able to do this; support your local folks and buy local when you can. Yes Walmart has local folks working and sales revenue and does community stuff on the local level; but they are a shadow of the mom/pop store who's life is in the business.

Less letters are being mailed. So my $0.02 will be going to maintain the current system that will be used less, instead of getting a smarter system better suited to the new market. They're taking my $0.02 so I may as well give them a penny full of thoughts twice over.

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