July 20, 2010

Pay What You Want

In 2007, Radiohead decided to shake up the record industry releasing In Rainbows without a record label or distributor. Instead, they released it online. The twist? Buyers could decide what they wanted to pay. It was part fuck you to the industry and test of consumer honesty. In Rainbows was a successful album but it's more difficult to tell just how successful it was as a pay-what-you-want experiment. An estimated 1.4 million copies of the album were downloaded almost immediately. The band calls this figure exaggerated. We do know that while one-third of downloaders paid nothing, the majority paid what they considered a normal retail price, most likely between $6 and $10 when you line it up against average prices on iTunes and Amazon.

Radiohead wasn't the first to try this nor will it be the last. The idea is so appealing, Panera's decided to try it. In May, the Panera Bread Company opened it's first non-profit pay-what-you-want restaurant dubbed the St. Louis Bread Company Cares Cafe in Missouri. The results have been so successful, the company will launch to more restaurants this summer.

Last year, we were all up in arms about the economy. It was the single thing on everyone's mind. I remember sitting in traffic listening to NPR on my way home and thinking that this was quite possibly a financial disaster that would devastate us all. I tend not to be reactionary but it certainly felt like bad news. And I wasn't alone in feeling that way.

A year later, things feel slightly different. Though not fixed, arrows seem to be pointing up instead of down. Fear seems individualized and less of an oppressive blanket threatening to smother us all. Banks have tanked, major manufacturers have shut their doors and the oft-cited Main Street has undergone a financial makeover resulting in more than a few boarded-up storefronts. But it feels like the dust is settling.

In light of all of this, do you think the traditional retail model should or could change? And are you better or worse off than you were this time last year?

Posted by Chris at July 20, 2010 8:27 AM

hmmm one year later...college graduate..check...job...check..still waiting tables?...check...things are in a holding pattern...one wrong move and the deck of cards will tumble...but thats just ohio

Posted by: becky at July 20, 2010 8:32 AM

Better off this year than last? Not really. I'm just managing what little we do have better than I was. Learning to live with less.
I feel for people like furniture stores, hair salons, restaurants, and the like because it's the extravagances that are being cut out.

Posted by: Maribeth at July 20, 2010 9:29 AM

Settled in a new city with an employed husband? Yes. Much better off. Still struggling to make ends meet---not as often, but still doing it!

Posted by: Christy at July 20, 2010 10:08 AM

The city and the state are struggling but I do see a slight upturn locally. As for us, as long as Social Security survives, so will we.

Posted by: Ann Elizabeth Adams at July 20, 2010 10:31 AM

I think there are some areas of the economic model in this country that could successfully change. Not every product or service can be sold in a "pay what you like" manner, but it can't hurt to think of innovative ways to sell a product.

As for better or worse: we are worse off, but things are looking up. My husband was laid off a year and half ago when the whole computer related industry took a hit. But he has just been offered a job starting next month, so here's hoping for some of my own economic recovery.

Posted by: MidLifeMama at July 20, 2010 11:40 AM

I don't have enough faith in humanity to think that these new retail models have a chance in the long term. But I'm no economist.

I suppose we're worse off; my husband still has no job but we are still making payments with money he's got saved from something. We've managed to save a bunch here and there that will pay the mortgage for approximately 6 months when he runs out. The job market sucks; he's had a few interviews but no offers. We can't get unemployment checks because husby was self-employed. I'll get a little raise at work next month, but just 3 or 4 percent, nothing that's going to offset our problems. Here's hoping everything's turning up. Maybe we can pull ourselves out.

Posted by: Brooke at July 20, 2010 11:54 AM

While other areas of the country may be improving, Las Vegas is not. Our unemployment rate is the highest in the nation now (YAY, US!), and it's believed that so many people are no longer eligible to receive unemployment, that the number is grossly underestimated. Many people and companies have simply moved away.

I'm the same as this time last year, with a boyfriend still facing a job move due to lack of drawing/designing/building here.

Retail? I can't think that far.

Posted by: Mindy at July 20, 2010 12:09 PM

I hate to be a downer, but that overall "things are looking up" feeling is nice, but not quite true. The unemployment rate continues to ride at 10%, which was once inconceivable, but now feels like the new normal. And lots of folks are without unemployment pay, like thanks Senate GOP.

Personally, I'm still ok. But I feel for the folks (including many of my friends) who have been unemployed for a year and a half. It's interesting, though, because I have been wanting to move back east for the last two years and I keep postponing, waiting for the job market to turn around. I'm finally applying for jobs anyway, because at this rate I'll still be here this time next year. (Don't get me wrong, I'm thankful I have a job. I just wish it wasn't so far from my family.)

Posted by: Erin at July 20, 2010 12:43 PM

I think the biggest adjustment in the New Economy is going to be on the retail side. People need to understand that there is a tug of war going on between online retailers and traditional brick and mortar stores.

The main reason that online-only retailers can offer such great prices vs. the places you can walk into is, obviously, they don't have the same amount of expenses -- namely renting a large, well-located retail location vs. warehouse space for their inventory, as well as having to pay people to staff the retail location.

Similarly, though different in many regards, large chain "big box" retailers have the advantage over smaller independent stores in that they can take advantage of economy of scale - their purchasing power allows them to get better deals from wholesalers and suppliers.

To me, the next seismic shift in the retail space will involve a showdown between these competing factions: online vs. stores, and independents vs. big box chains.

Personally, I like that I can walk into places and see, touch and smell (and try on, etc.) things I need or want to buy. I am willing to pay a certain premium for the ability to do this. There is a critical point, however, beyond which I am unwilling to pay this premium; I won't pay twice as much for an item at a store that I can get online for half as much.

Posted by: Mark V at July 20, 2010 2:25 PM

I'm hunkering down, figuring there are still a few more years to the Decession; I think that there is some uptick, but I don't think its sorted itself out yet ( derivatives market crash? European bankruptcies? Space hamsters? All open questions... )

I remember hearing a few years before the crash that there was 4.5k sq feet of retail space per person, so I think that the whole industry was bloated. But we're also a consumer culture; everything we own is designed to wear out in a relatively short lifecycle, and be replaced rather than repaired, so I think that there will always be a retail cycle.

I think we'll know the economy has truly turned and is rapidly growing when the size of the dollar menu shrinks.

Posted by: metawizard at July 20, 2010 5:08 PM

Well, both, I guess. I'm closer to being done my degree and getting a "real" job (oh please, let me get one.) but also deeper in student debt. I think I'm scared of the 'real' world.

Posted by: Heather at July 20, 2010 7:11 PM

Better, but that's due to individual circumstances. I still think our children will not have as "high" a standard of living as we did. And I also believe that's a good thing.

Posted by: Laura Gato at July 20, 2010 7:15 PM

i would say it might be a wash right now. my husband gets paid more money, but our house value continues to go down...

i'm still a little skeptical about this whole economy getting better business.

Posted by: kati at July 21, 2010 8:17 PM

I dont have a better retail model and I don't see it changing soon. However, I like the idea. I think what makes the idea work is that it's unique. If it wasn't unique anymore it wouldn't work.

Better off this year. Job security is better and so is the stock market/mutual funds.

Posted by: Brad at July 22, 2010 9:20 AM

I'd worry that product quality would start to tank in light of many people under-valuing products in the process of trying to save themselves money. One person's high-quality something is another person's 'meh' and by virtue of this subjectivity, shit would hit the fan and we'd end up repeating the French revolution. And that was a really bad revolution.

I'm about where I was last year, financially, although I'm preparing to dump 90% of the investments to pay off debt. I have little faith in the stock market at the moment and am leaning toward the idea that reducing debt is a better use of my money than to watch it slowly shrink in value over the course of the next year or two.

Posted by: You can call me, 'Sir' at July 25, 2010 11:28 AM

I'm about the same as I was last year (hanging on), but I think these experiments and others point to something else: retail can be very clueless about what customers actually want/can afford. Price is *not* king all the time, nor are a lot of other things retailers seem to think customers care about.

Posted by: Kat at July 25, 2010 6:36 PM