Good idea at the time

A brutal look in the mirror

This is a rather brutal perspective from Jordan Thaeler, a restaurant/retail industry thought leader. Yes, it'll be insulting to some. Eye-opening to others. And hopefully, thought provoking to all.

Here goes...

When most people stick their hand over an open flame they realize pretty quickly that it can cause serious damage. The searing pain radiating through the arm. The red, bubbling skin. The welling tears and waves of agony.

But brick and mortar merchants? They’re not most people.

In fact we think it takes the average merchant 5 years to realize that something causes them harm. By then, of course, all that’s left is a charred stump where their hand used to be.

Here’s how we can prove it.

When Groupon launched in 2008 merchants lined up the block. Part of that was undoubtedly due to timing – in 2008 the economy crashed and merchants were desperate to find growth – but part of it was also due to indolence. Some silver-tongued 20-something from Groupon was dialing merchants, fast-talking them through the meteoric success of merchants who would give away their goods at 25% of MSRP (not a typo). Merchants would reconcile this call with what they heard from their neighbor, or even what they saw in the news. Putting two and two together the merchant decided Groupon would be a definite winner: a genius maneuver of the highest order.

Few bothered to do the math to learn that a customer would need to return 14 times at full price in order to breakeven on that Groupon deal. Seems crazy that a merchant wouldn’t do this math when their entire business was on the line, right? But again, they’re lazy. It took merchants about 5 years to realize that Groupon was a loser. Lord knows how many thousands of merchants Groupon bankrupted before the market learned their expensive lesson either.

The learning here? It’s pretty straightforward: do some math before you embrace a solution as your panacea. How about you put in some work to fix your labor, inventory, and other business problems right in front of your nose before swinging for the fences?

But that takes work and isn’t sexy!

So history just repeats itself.

Next on the carousel is the third party online ordering/delivery crazy that comes with (most often) unsustainable fees for merchants. You’ve got to be so. damn. certain. that every customer coming through these platforms is incremental or you’re just hemorrhaging money like it’s Groupon 2.0. But again, merchants won’t bother to do the math. “Hey if my neighbor is doing it it must be good!” Except your neighbor is probably a moron too.

We’re about 2.5 years in on this whole third party craze, but where does the wheel stop? With merchants giving over their entire customer list to some third party that holds it hostage while they pile 30% commission on every order? Until the merchant can’t buy colored pencils for their kid’s grade school art project because the third party “partner” needed to fly their employees to Vegas for a weekend?

As if that isn’t bad enough we’re only one year in on the whole “Free POS” scheme that will undoubtedly end with merchants doubled over, sobbing into their crusty dishrags at 2 AM as they slide another $10,000 in profits to their locked-in payments/POS provider. But only because they can’t come up with the $30,000 needed to buy themselves out of their existing contracts.

In an effort to save time merchants just reach for what’s closest. Which is obviously incredibly dangerous when we’re talking about businesses with thin margins.

Another explanation for this behavior is psychology. Merchants often lack critical thinking skills. In an effort to hide this fact they follow the herd. In classic monkey see, money do, merchants assume everyone else is onto something and blindly follow what they’re doing. No more attention paid than that, sadly.

So raise your glass for another two cycles of merchant pain. See you in 5 more years for the next one.

Related article: How online ordering platforms hijack your customers 

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