Ari Armstrong's Free Colorado

Recently I bought a Canon camera from Costco. (It’s an Elph 110 HS, and so far I’m quite happy with it.) I bought the Canon after buying and returning a Nikon to the store; I didn’t like the Nikon’s video abilities.

After my experience with the return, I thought I’d try to avoid that with the second purchase. Returns are costly for me (as I have to box up the item and drive it back), costly for the store (which at a minimum has to process the return), and costly for the producer, which has to repackage or perhaps eat the item.

So I asked the Costco team to unhook the display camera from the board to which it had been wired (for security), give me the battery and flash card, and let me play around with it for a while. The staff was happy (or at least willing) to accommodate my strange request.

So I shot some stills, took some video, then uploaded that content to my laptop (which I’d brought along for the purpose) to check out the results. I bought the camera much more confident I’d be happy with it. (It has only a 5x zoom, but, while I’d wanted more, I’d also read numerous reviews claiming that longer zooms tend to have problems with sticking.)

This got me thinking. While in my youth it seemed like catalog buying would become a thing of the past, today it is back in a serious way, with Amazon leading the way. I buy a lot of stuff online simply because I can’t find it locally—or because the local prices are significantly higher.

But internet buying creates a problem for brick-and-mortar stores: people come into the stores to try out products, but then they buy the products online—often on their mobile devices in the store itself.

So I thought to myself, why doesn’t somebody try separating out the service of letting customers try stuff out from the service of delivering the product?

What I envision is a “Tester Store.” It’s a large, warehouse-type “store,” filled with display models of loads of products, only the “store” doesn’t actually sell any of the products. You just try stuff out, then buy the stuff online.

Why would anybody do such a thing? Where’s the profit? When I mentioned this idea to a friend, he pointed out that such store could potentially become the world’s largest Amazon affiliate. (I mean, not in Colorado at this time, because our idiot legislators imposed an “Amazon tax,” but in other parts of the country where the legislators aren’t quite so painfully stupid and destructive.) The whole point of the “store” would be to actively encourage shoppers to order stuff online.

There is a range of products for which this would be useful. Obviously books are out, because you can just read previews digitally. But anything you want to handle before you buy it, such as cameras, clothing, air conditioners, cookware, etcetera. The whole point would be to make the stuff easy for people to check out, try on, put through the wringer.

I envision something like an Ikea, someplace with food, that’s sort of like a playground for adults (and kids, too).

Other than the “Amazon affiliate” strategy, there are a variety of ways such a store could make money. Perhaps many or all manufacturers would provide free floor samples to keep costs down. The store could sell old floor models, or not, depending on their condition and on agreements with manufacturers.

Think of how much better this would be than today’s typical model. Often I’ll look at products online at various stores (Walmart, Home Depot, Costco), but the local store won’t cary something. So I have no ability to try out that stuff before I buy it. Instead, why don’t stores just carry one or two copies of an item for people to check out, then ship from a central location?

Obviously this eliminates the “instant gratification” of real-store shopping. But usually I don’t want something right now; I want something I know will work for me. (Here’s another idea: the store could sell limited items at a premium to those who have got to have it now.)

I don’t know whether this idea would work (and I certainly don’t want to spend the effort to try it out). But it seemed interesting enough to me to blog about. If somebody else wants to run with it, be my guest.

I’ve used Consumer Reports exactly once in my life, several years ago when researching used cars. It’s too bad I haven’t used it more often—the organization features reviews of several products I’ve recently purchased, including cameras and air conditioners.

So what’s the problem? The unfortunate fact is that Consumer Reports makes it too hard for me to pay money to read the research relevant to me. It’s especially ironic that Consumer Reports sucks at making its material available to consumers, given that helping consumers is supposed to be what the organization is all about.

Let’s take the example of air conditioners. To get the relevant information, I’m told that I need to “Subscribe now” at a rate of $30 per year or $6.95 per month.

Well, screw that. I’m not going to sign up for a long-term subscription that I then have to think about and manage just to spend five minutes to learn about air conditioners.

What I did instead is just rely on whatever free reviews I could scrounge up through Google searches and from Amazon customers.

It would be extremely easy for Consumer Reports to get money from me in exchange for research. Just sell me individual reports in pdf format for a few dollars. I would have happily paid five bucks for the latest Consumer Reports information on cameras and air conditioners. But apparently Consumer Reports thinks its more important to unsuccessfully attempt to bilk me out of $30 per year than to actually get $10 right now for specific reports. That’s just bad business.

I really want to pay you my hard-earned money, Consumer Reports! You need merely make it easy for me to do that.

Update: On July 9, Keith from Hewlett-Packard contacted me through Twitter and provided me with his number. I did have to provide additional details about my printer model, but Keith promptly facilitated the exchange and restored my faith in Hewlett-Packard’s commitment to its customers.

Dear Ms. Broussard of Hewlett-Packard Company’s ISB Team,

I have been a loyal HP customer since the early ’90s, when I purchased my first serious printer (my actual first was a dot-matrix), a glorious HP laser printer. I ran many thousands of pieces of paper through that workhorse.

It saddened me, then, to read the many news stories all indicating that your once-glorious company has been heading down the toilet. For example, just today the Los Angeles Times refers to HP’s “faltering business.”

Your letter to me dated June 27 hints to me why your company is faltering. You obviously don’t take any pride whatsoever in your products, nor do you care anything about making your customers happy. Instead, you harangue me for daring to politely ask HP to replace a faulty HP product that I paid good money to purchase.

On June 4, I drafted the following letter to Hewlett-Packard. I sent the letter with a defective ink cartridge to the company, hoping for a timely and satisfactory reply:

Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA
94304-1185

Ari Armstrong
9975 Wadsworth Pkwy. #K2-111
Westminster, CO 80021

Dear HP,

We purchased the enclosed Color 61 ink cartridge, but unfortunately it is defective. (Our printer gave us an error message, and the next cartridge we tried worked fine.)

I request a replacement cartridge or a certificate for the same.

Thanks,
Ari Armstrong

P.S. I tried your customer service phone line, but after an absurdly long hold time I gave up.

Rather than send me a timely and satisfactory reply—with a replacement cartridge—you instead sent me the following huffy note asking me for information a) that I had already provided to Hewlett-Packard or b) that was entirely irrelevant to the company for replacing the defective cartridge:

So please allow me to take this opportunity to reply to your letter.

First, I was shocked to read that HP does not normally replace defective products, that you deign to “make a one time exception” in my case to do right by your customers.

So let the buyer beware: Hewlett-Packard does not stand behind its products, judging by Broussard’s reply.

Second, I found it ludicrous that you requested my “valid shipping address” in the very letter that contains a copy of my valid shipping address. Obviously you are not seriously attempting to get the relevant information from me to make a good-faith effort to replace your defective product; instead, you are merely hassling me.

I therefore take this opportunity to beg your forgiveness for purchasing HP products.

Finally, no, I will not provide you with my telephone number, my printer model number, or my printer serial number in order to process the replacement. Perhaps in your ineptitude you missed this detail, but I sent you the defective cartridge. That provides quite sufficient information, I think, for you to send me a replacement! (Moreover, it seems to me your crack “ISB Team”—whatever that is—should have embraced the opportunity to check out the defective cartridge in an attempt to avoid such manufacturing defects in the future.)

It seems to me that the obviously right move in your position would have been to promptly and cheerfully send me the replacement cartridge. That’s what good companies do, companies that do not wish to suffer “faltering business.” Well, obviously you blew your first chance. Please consider this your second.

Sincerely,
Ari Armstrong

[October 10 Update: "Netflix "has abandoned its unpopular plan to spin off its DVD-by-mail service and rename it Qwikster, saying it will continue to offer both services through its flagship web site." From Netflix: "It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs. This means no change: one website, one account, one password... in other words, no Qwikster." Obviously this news renders moot much of my previous discussion, preserved below. -Ari]

As I indicated yesterday, I’m a little shocked by all the people sliming Netflix for the “crime” of offering customers amazing services for stunningly low prices.

No, the company did not handle the price hike well (though its real error was offering unrealistically low prices in the first place). And I do recognize that splitting the DVD rental from the online streaming (with two web portals and two bills) adds a minor inconvenience to customers using both services.

But many treat Netflix like its leaders had absolutely no reason for splitting the business other than to annoy customers. In other words, people utterly ignorant of the business’s internal forecasts and long-range strategic plans think they can armchair-CEO better than those whose livelihoods and futures rest on the success of the company. I think that attitude is more than a little presumptuous.

Now, I don’t know those forecasts or plans, either; however, I can take some educated guesses as to why Netflix decided to split the business.

1. The inconvenience is minor. Is it really that hard to maintain two accounts? No. It’s extremely easy to log into two pages and maintain two queues. Until recently I used both of Netflix’s services, and that required maintaining two lists, anyway. If something in my DVD queue appeared in streaming, I still had to manually rank the item in my streaming list and remove it from my DVD list. So the new system is trivially different. (That said, Netflix would do well to alert customers when DVD items become available for streaming.) [Update: Somebody pointed out to me that it was possible to maintain an integrated queue on the Netflix DVD list, as everything streaming is also on DVD, but I never found that helpful.] And two lines on one’s credit card bill instead of one? Like, Oh, My, God, surely the sky falling comes next. Get a grip, people.

2. Most people will naturally gravitate to one service or the other. As I reviewed yesterday, I dropped the DVD rentals after Netflix announced the price hike. According to Henry Blodget, half of Netflix’s customers used both services. (For those keeping track, that means half used only one service or the other.) But the figure for both services was inflated by the ridiculously and unsustainably low bundling price. If you wanted the DVD service, you could get streaming on the side for a pittance more, and vice versa.

Those running Netflix, not being as dense and short-sighted as so many of their critics have managed to appear, can see the technological trend lines. Streaming is getting progressively faster and cheaper. More and more people are buying iPads and other portable devices that can handle streaming. Ever more content is becoming available for streaming. At the same time, some people just prefer the older technology, can’t get good internet connections, or don’t want to tie up their internet with streaming. Thus, the two groups of customers seem to be diverging, not merging.

3. The split allows more tailored marketing. Assuming the above to be true, that the DVD and streaming customers represent very different demographics, a split company may have a much easier time tailoring its marketing campaigns to the two distinct groups.

4. Splitting the business allows easier adjustments to both sides. Not a single critic of Netflix can predict what’s going to happen to the Post Office over the coming months and years. Perhaps Netflix’s critics have failed to notice this little detail, but the USPS delivers Netflix disks. The USPS has been hemorrhaging billions of dollars, so delivery schedules or prices may change dramatically over the coming months. Netflix may have to change its DVD rental service accordingly. At the same time, while streaming becomes faster and cheaper, it could be that hot new content may cost Netflix more to secure. Splitting the business allows each side to easily and independently adjust pricing and details of service.

5. Splitting the services allows for splitting the company. Others have suggested this. With the services split within Netflix, the company could easy split legally as well, forming two autonomous corporations. Or Netflix could eventually sell off the DVD side. I can’t imagine that the people running Netflix have never contemplated such possibilities.

Netflix can clearly see the model of what happens to companies that fail to adapt to changing technology: Borders. Netflix has chosen to take its lumps in the market now in the hopes of sustaining its long-term health. While sensible observers can debate whether Netflix made the best long-range decision, I think it’s foolish and frankly mean-spirited to fail to recognize the plausible reasons supporing the company’s shift.

I’m a little surprised by the negative reactions to Reed Hastings’sannouncement that Netflix is splitting its services into online streaming and DVD rentals.

When Netflix announced its price increases a few weeks ago, I evaluated my streaming queue and my DVD queue, thought about the costs, and decided to dump the DVD side of the service. So now I pay $7.99 per month — around 27 cents per day — for continual access to a spectacular selection of streaming television shows and movies. For that pittance I can watch most of the Star Trek series, Charmed, The Twilight Zone, and tons of other awesome shows, films, and documentaries. In what universe is that not a spectacularly amazing deal?

If I wanted, for another $7.99 per month I could rent DVDs, one at a time, without monthly limits. At least where I live, the Netflix DVD cycle takes around three days, meaning I could rent as many as (around) eight DVDs per month with this plan. (Realistically I’d probably cycle through around four per month.) In what universe is $2 or less DVD rentals not a spectacularly amazing deal? However, it just wasn’t quite a good enough deal for me, given the alternatives. Redbox rents new release videos for a dollar, we also use Hulu (the “free” version), and I purchased a couple seasons of House on used DVD. But I came close to dumping my other sources and going solely with Netflix and Hulu.

Think of it this way. If Netflix didn’t exist, and a new company suddenly came on the market to offer what Netflix now offers, a streaming service plus a DVD rental service, each for a low monthly price, people would fall all over themselves signing up and lauding the new service. Apparently, given that Netflix has been offering its customers such amazing value for so long now, the company now deserves derision and scorn rather than praise. I think that’s a little nuts and frankly a little ungrateful.

Now, I do see a problem with disconnecting the DVD queue from the streaming queue. The problem is that, when I (used to) put a DVD on my queue, and then the same item became available in streaming, the item appeared automatically in my streaming queue, and I didn’t burn a DVD rental on it. Now, if you get both services, you’ll have to manually add an item to streaming and delete it from the DVD queue.

However, Netflix seems to be anticipating — and I think correctly — that most people will come to want one service or the other, but not both. I think everything available for streaming is also available on DVD, and the opposite will increasingly become the case as time goes on. I can see why some people would prefer DVDs over streaming, though I definitely prefer streaming. I found this line from Hastings to be especially interesting: “DVD by mail may not last forever, but we want it to last as long as possible.” It will be interesting to see what happens as streaming gets faster and cheaper and the United States Postal Service continues to struggle financially.

For now I will simply offer my gratitude to Netflix and stand amazed at how much better my life has become in the Internet Age.

I confess I was skeptical of the Ikea store when it first came to town. But it’s a lot of fun, and the restaurant there has some great deals. We found a number of items throughout the store that were less expensive than what we’ve paid elsewhere. Unfortunately, a city water main broke the day we went, preventing us from buying the Swedish meatballs for lunch. Next time.