The Fine Art of the Haggle: Reprised

A little while ago, I wrote about an experience I had at a sales kiosk in Yorkdale, and how the prices are far from fixed.

Well, just about everything I guessed at was vindicated when, shortly after, I ended up working a few months at a similar kiosk. I got to see the other side of the equation.

I left the job about two weeks ago, and just came across this post from SomedayNurse, whose blog I'd never read before:

Beware the Mall Kiosks of Death

You think you are safe. After all, this isn’t a dusty marketplace in Calcutta. This is a shiny indoor shopping mall blasting AC and Top 40 Muzak. Sure, there are things to buy everywhere, but they are all in safe stores were the merchandise itself may be seductive, but no one will bat an eye if you leave without buying anything.

When I think of Mall kiosks, I think of bored teenagers sitting on their cell phones in front of carts of Designer knock-off sunglasses or cell phone accessories. But these guys are slick. Predatory. Young and beautiful, with syrupy accents and hard eyes.

My sister told me about the time she was manipulated into buying a 25 dollar jar of Dead Sea salt scrub from a beautiful Israeli woman who promised my sister the skin of a goddess in five minutes a day. I laughed at her that she could be conned like that.

I am so sorry, lil’ sis. I understand now that you were powerless to resist.

I have really curly hair, and the young man at the Colourful Kitty (yes, I said Colourful Kitty) kiosk asked if I wanted him to straighten it “for fun.”. I didn’t have to stop. I never stop at kiosks. But the straightener was kind of cool. I’d never had my hair completely straight. I haven’t wanted my hair to be straight since I was about fifteen.

The straightening iron did a great job, but he wanted way too much for it. He said I should make him an offer. Even as it was happening, I was thinking how interesting it was that I that someone who considers herself as a critical thinker was allowing herself to be hustled like this.

The worst part was, I didn’t even want the stupid thing that much.

Now I have stick-straight hair and my wallet is minus a days wages. At least it’s a nice straightening iron. If I ever cut my hair, I might actually use it.

[....and in the comments section]

Phaedron Says:
April 28, 2009 at 12:57 am

I actually worked for a short time at a similar Kiosk in Toronto, Canada. It was fun: my job was practically to flirt with girls all day to pump up sales.

The funny thing is, I actually wrote about a kiosk that I encountered on my blog (http://phaedronrising.blogspot.com/2009/02/fine-art-of-haggle.html)... About a week before I ended up starting a job at a similar kiosk!

So? Here are some of the things that I learned...

There's often a colossal margin at an Israeli-style kiosk between a product's "list price" and the minimum price at which a salesperson can actually sell the product. Those prices are never listed in a way that you can browse through without talking to the salesperson.

The salesperson needs to make a lot of snap judgements about a potential customer very, very quickly. The best thing to do is offer the product at a high margin, building enough room into the sale to pay for "free gifts".

There are two main ways of dealing with a price-based objection:

1) You (well, I) would use the margin between the higher "list price" and the minimum price at which the product can be sold to pay for those "gifts".

2) The salesperson can be willing to lower the price.


The first approach is much more common, and here's why:

First, the salesperson knows that 90% of the time that the customer has a money-based objection ("I can't spend that much"), it's not true. Maybe she can't spend that much AND get that cute top she wanted. Of course, she is not going to say that, so she couches the objection as a one-dimensional issue of cost. By adding in those freebies - already paid for by the large margin of the sale - the salesperson can, in effect, sell 3 or 4 things at minimum price while letting the customer walk away with the feeling that she's gotten a fantastic value.

Second, the salesperson can lower the price. This will only happen when he truly believes that you don't have enough money to pay the higher price.



It's a sales structure that we're so unused to in Western retail - the idea that prices are rarely fixed: the price at which an item can be sold becomes, ipso facto, its real price. We're used to seeing a shining red widget on a shelf with a $42 tag on it, and everybody pays the same. In a kiosk like this, the same item will sell for $130, $50, and everything in-between throughout a salesman's day.

It's easy to jump to the conclusion that it's "unfair," but even in North America, we have a culturally accepted example of this sort of flexible-equilibrium price structure: real-estate.

The price of a house is - by definition - what people will pay for it. We're just not used to seeing hair-straighteners, nail kits, makeup or skin care sold in the same way. Our initial reaction is to think it's fair for houses, but unfair for a skin cream, and it usually stems from the fact that the item sells for more than the cost of producing it. Nobody bats an eye, though, when a house sells for more than its construction cost.

The same house could, under circumstances dependent on nothing more than the situations of the seller, the buyer, and the general market, have a $150 000 range that it could potentially sell for. It can feel unfair at a kiosk only because we're not used to the same sales structure being applied on a retail level.

That's why it's so important to make the customer feel like she has "won" the deal.

But do you want to know the most interesting thing that I found while working at a kiosk? People that bought, almost always returned for more. The hardest part is for a salesperson to get that person to make that first purchase!

And when the first sale is made at an expensive price, the customer walks away feeling like they have something extremely valuable: it's the feeling of having that $130 luxury skin cream. She won't want to go back to the $40 stuff she was getting at her local store.

Truth is, what the kiosks are great at is taking a product that's moderately better than the competition, and commanding a substantially greater price for it. Of course, the overhead on a kiosk is far lower than a store at a mall, so the kiosk *could* technically afford to sell a higher-quality product for the same price as the competition. But why would they? In the case of consumable goods like skin care or makeup: if it's sold for the same price as the competition, a customer will assume it's of similar quality to the competition's.

It's the people that you sold to at a "discount" rarely return.

A little less wisdom: Okay, God?

I just had my wisdom teeth out. It hurts like a motherfucker. The general anaesthetic and the Nitrous Oxide are wearing off, leaving only a general contempt for everything.

So, just as I sometimes whack my broken toaster on the off-chance that it will learn its lesson, I'm going to write an open letter to God on the off-chance that he exists.

As the capital G suggests, I'm addressing the god of Judeo-Christian tradition. I will, however, happily accept replies from other gods, demigods, or their non-corporeal messengers.



To: God_Allah_YHWH@gmail.com
CC: shiva_destroyer_of_worlds@yahoo.in; buddha_belly@hotmail.cn; prince_of_darkness@microsoft.com; mjollnir_man@gmx.com
BCC: Eric "Slowhand" Clapton

Why, God, why?

Why would you have given me a special subset of teeth that cause nothing but pain? Is there just a little of Job in all of us? It it a vestigial reminder of some Original Sin?

I've got to say, I'm a little vexed. I know you have a Plan for all of us, but for the life of me I can't figure out how my wisdom teeth fit into it.

Pain, I thought, was a necessary result of free will. But this had nothing to do with free will! There's no choice that I or anybody else I could have made differently that would have avoided this, save for to have had these teeth removed years ago.

I can't drink alcohol, I can't have a cigarette, I can't chew solid food; I'm in pain, I'm still a little high on laughing gas, and frankly, I'm more than a little pissed.

Feel free to let me in on the joke if I'm missing anything.

Sincerely, Phaedron.

The Fine Art of the Haggle.

Some prices are fixed. Some aren't. Knowing the difference helps.

Yesterday I was at the Yorkdale, a local mall in Toronto. While sifting through the meandering populace for cute girls' numbers, I came across a kiosk booth selling cosmetic skin products from the Dead Sea.

Now, I'm not one of those prissy primping douchebags; I don't gel my hair, spray-on a tan, or spend long tracts of time in front of my mirror. I'm a man. But I do care about the way I look and I do have mildly dry skin in the winter, so when the saleswoman approached me as I walked by, I let her reel me in a little for a closer look.

We bantered a little: about what products I already use (limited to a simple pre-shave scrub and my shaving cream), and about the astonishing fact that nearly all the standalone kiosks in the mall are manned - or womanned - by full bore, to-the-core, Hebrew-speaking Israeli expats. Then she worked her pitch.

After a demonstration of a face-cleansing product, she went went into her the-list-price-is-$130-but-I'll-let-you-have-it-for-$60 routine. Here's where I was suddenly faced with options:

1) I could take it for $60. The product wasn't something that needed to be used anywhere close to daily, and it seemed to be a very good one from the demonstration. It was probably worth the $60 she pitched for it.

2) I could walk away. Sure, it was a great product, but $60 can buy a lot of beer.

3) I could negotiate.

Now, knowing when price-negotiation is an option means assessing a little bit about how the sale is structured. When a wage or salaried employee makes a sale, there's little incentive for them to enter into a negotiation: they get paid whether or not you buy what they're selling. The situation changes, however, in either of two cases: if the salesperson works fully or partially on commission, or is the salesperson owns the business and sees a perfect correlation with the profit margin on a sale and the money in their pocket.

Many kiosks like that one are either corporate or franchised, and most of the sales staff work on commission. The lady working there probably made 20%-35% commission of any sale made above cost price, so she has something to gain from any sale above that price, and everything to lose if I walk away.

It seems trivial to analyze when we're talking about a face cleanser, until you realize that the biggest financial decisions you will ever make in your life fall into the same organizational category. Buying a house or a car both entail working through either a commissioned salesman or a commissioned real estate agent. The difference is only a matter of degree.

The incentives on each side of the consumer and the vendor are important to understand. The consumer has demand for a product, and if the perceived value of that product exceeds the cost, he will buy it. If it costs more than it's worth, he'll fuck right off.

On the other side of the equation is the vendor. The vendor has a derivative sort of demand in the transaction: the revenue or commission earned from the sale. If that revenue exceeds what the product costs them, they profit from the sale. If it doesn't, they'll tell you to fuck off.

The negotiating room, in our case, is the margin between the list price ($130) and the vendor's cost (probably between $15 and $30). Within that range, the game is zero-sum. The difference in those two numbers will either end up in my pocket, or be divvied up between the sales lady and the owner - assuming it's not the same person. It's in that magical margin that negotiation takes place.

She had made the first move. The $60 pitch didn't come out of nowhere. From before we'd even made eye contact, she had began analyzing me. Did I wear clothes that indicated discretionary income or did I look like a moneyless waste of time? Did I carry myself in a way that indicates confidence or do I project insecurity and the impression that I'm a bit of a pushover? Did I seem like the type of person who would be interested in her products in the first place?

All of those calculations - and a whole lot more, I'm sure - ran through her head from the time she first saw me to the time she offered me the skin cleanser for $60. If I'd given her a different impression of myself and my interest, it could just as easily have been $100, or even $50. Maybe, if I seemed interested enough and willing to pay it, she'd have neglected to pull out the price list and offered me dermatological salvation for a mere $150.

But I wouldn't have paid $100 for it; I wouldn't have paid $75. And if I buy the product, anything less than $60 is money in my pocket.

I pushed a little, and she pushed back. I ended up walking away having traded the skin cream for $40 of my hard-earned cash.

So beyond my hefty preamble, here are a few insights I've gleaned about price negotiation.

Demand Asymmetry. When either the consumer or the vendor cares more about the transaction, they end up with less money in their pocket. If the mall were more crowded, and there were tons of potential customers strolling by with less of a spine than me, she'd have been happy to hold firm at $60, take it or leave it. If there were a competing business with a similar product nearby, and she'd have held firm at $60, I'd likely have walked.

That really is the biggest sticking point in a negotiation. You have to be willing to walk away. If you're convinced that you can't live without what they're selling, and there's no better place to get it, the salesperson will pick up on that. And you can bet your ass they'll have a high asking price. What's important to understand is that there are very few things you can't live without. She's not selling the only glass of water amidst miles of desert sand.

And you have to be willing to actually make a counter-offer. It's astounding to me how many people never do. We, in our modern Western culture, are so used to fixed prices that we take them for granted, and seldom even think to bargain. She has been doing this for a while, and has likely calibrated her price pitch very well-tailored to her assessment of the customer. Most of them - if they'd sat through the impressive demonstration - probably took the price at whatever figure she named.

Be the exception to the norm. Know how the incentives break down, and be willing to walk away. If the seller wants more than you're ready to give up, then do so: actually walk away.


If there's one piece of advice I can offer for people making a bigger purchase such as a car, here it comes. After you do some solid research on some options you're interested in (you should always do research, and never only have only one option), go to a few of your lesser choices first. Treat them as practice runs. Unless you're offered an unbelievable deal, you'll probably end up walking away from those. When you finally walk in the doors of the dealer selling the car you're more interested in, you've already internalized that I'm-willing-to-walk-away-from-this-deal-if-you-
try-to-bend-me-over-and-fuck-me-in-my-wallet frame of mind.

The salesman will pick up on that. And you'll benefit as a result.

Negotiation isn't shameful. It's the purest distillation of the free market. It's part of the economy that makes modern society possible.