The double whammy of being poor – making less and getting charged more
blog.paribus.co
blog.paribus.co
1. The absurd proposition that it's unjust that you will find a better deal if you spend more time looking for one. Of course you will.
2. The claim that e-commerce is a regressive tax on the poor because purchases are bigger percentage of the poor's income. You can say the same thing about any purchase. A burger is a bigger percentage of a poor person's income than a rich person's income.
Paribus is providing a great service, but this is a marketing/PR article pretending to be serious economic commentary and analysis. It's just hopping on the bandwagon of a narrative that's politically en vogue (that the world is stacked against the poor).
Are you seriously implying that this is a mere matter of opinion? Sociocultural disadvantage is what being poor means, for as long as mankind has measured wealth. Certainly there's disagreement about what should be done about that, if anything, but the fact of the situation is not in doubt.
Thanks for the kind words on the service. On your feedback, here's my take:
1. Stepping back, isn't it more absurd that people are, by default, charged more unless they spend significant time dealhunting? The claim is not that the disparity itself is unjust, just that it's time for this to come to an end.
2. For all of the biggest e-Commerce players (Amazon, Walmart, etc.), their biggest business lines (and ones where they're investing the most) are in the sales of basic necessities (food, household goods, etc.). So considering how dynamic pricing will impact people (esp. re: basic necessities) is important. I'm not sure why you're dismissing the key point so quickly -- if we care at all about helping bridge the income divide, we should care about helping the poorest get the most affordable prices.
In any case, I wrote the article because it really did shock us. Joe is a real person and a friend and we hope it does some good to show a small slice of what we're seeing.
I strongly dislike such tactics since it causes people to waste a ton of time dealhunting, but isn't this usually to the benefit of the poor? These tactics allow companies to price discriminate and charge the rich more -- since they won't spend the time clipping coupons, waiting inline on black friday, or waiting for sales -- and thus theoretically subsidizes the 'discounted' prices for the poor.
On a separate note, what information from my email gets sent to your servers? Do you run a search for "Amazon", "receipts", etc. in GMail's cloud, then only send matching email to your server?
On the second -- exactly. Paribus is designed to only pull in emails that appear to be from known merchants (Amazon, Bonobos, Best Buy, etc.).
Even without ericglyman's link to corroborating data, I would assume it goes the other way. Coupon-clipping and online deal-hunting requires time and, especially, emotional energy that the poor often don't have; and since the poor generally have to use essential items until they physically fail, and then scrabble frantically for the first available half-decent replacement, they don't have the luxury of waiting for special sales.
The merchants do deals not for the customers, but for themselves: to maximize profit, increase market share, and maybe achieve some other goals. If you guys are communists, and think corps are evil, and the poor are exploited, that's fine, but how can you hope to successfully operate in any industry without comprehending the basic motivation of the principal actors?
In a highly-competitive marketplace, the stores that treat people right will win volume. Those who win volume take the market. So don't rip customers off (or be extremely quick to correct it when you're called out) and you'll gain customer loyalty and all the subsequent transactions.
The world doesn't owe you a deal, but then again, the customer doesn't owe you their next purchase. Life is long. As a store, your job is to keep earning customer trust so they come back.
ie. if what you're saying were true, why are there still businesses that only give deals to people who hunt for them?
> To paraphrase what the fine folks in the US like to say, the world doesn't owe you a deal.
I’m from the US. 40% of us believe the earth was created a few thousand years ago. Be immediately skeptical about anything we commonly say. (http://www.livescience.com/46123-many-americans-creationists...)
(And it even contradicts the whole point of the "US". We’re born into all sorts of bizarre deals, like the so-called social contract I never consented to.)
I think you make a good point here. I'm not sure it always works out one way or the other though. We can talk in generalizations, but there are also very savvy poor shoppers and very careless rich shoppers. My inclination in matters like this is that it's better to arm people with information and encourage them to be savvier. I think what you guys are doing is a great example of this, using technology to empower people over their own finances.
More of a musing: I do wonder if it is ultimately self-defeating. If everyone were to use Paribus, companies would stop offering special deals in the first place. Maybe it's a good thing overall. But the savvy poor shoppers would be hurt by this.
In many cases the added on part is larger than the original debt.
Then there's buying quality products that last longer by the wealthy and crappy products that need to be replaced (far) more frequently by the poor and many more examples like these.
The major point that you're failing to argue against is this: poor people often must use loans to live their day-to-day lives.
It doesn't matter what proportion of bad debt is the result of poor people and what proportion is due to financial ignorance. The point is that poor people suffer by requiring loans.
Do some research on payday loans and car-title loans. These are some extremely exploitative lenders taking advantage of people who aren't able to make ends meet.
They were not irresponsible people: they had smart phones but no landline: Smartphone for $60/month versus landline for $70/month, they were making some smart decisions about where to spend their money.
The issues they did have were not being in contrl of their budgets. For the majority of these families, just learning about the envelope budget system helped them regain control. Also learning how to shop around more carefully and pay attention to whh coupons were useful and which were merely advertising helped.
The catch for low incme families can simply be not knowing how to be ruthlessly disciplined with their budget.
There is a vast gulf between, "being irresponsible," and "not knowing better ways to manage their money."
Poor people are often poor because they do not have access to the same opportunities as you: inadequate education, poor training, naiveté about wealth-building habits, and so on.
You can help make the world a better place by not perpetuating the myth that poor people are popr because they are undisciplined, lazy, stupid, or irresponsible.
Even better, find a local support group for low income families and see how you can provide assistance.
If I was so poor as to barely afford food I would be living either without a phone or with a $20 shit-phone on a bare bones prepaid plan. Costs hundreds less and gets the same shit done (person-to-person communication)
The $60/m plan with meh smartphone is much cheaper than landline + computer + Internet.
Furthermore, I often see the homeless guys in NYC with cheap Dell laptops and Thinkpads using public Wifi to Skype their buddies. So there's that.
Whether or not you're right about how you'd actually behave, it's irrelevant. We can see how poor people actually do behave, and we can look to solutions that work empirically rather than philosophically.
If you were poor and unemployed, would you go without a phone, and access to email, LinkedIn and other services while you were looking for work? How do you edit those Word documents or read PDFs?
A smartphone is cheaper than a landline and desktop computer of any variety.
If you really believe that a person can look for work with just a $20 feature-phone, go try it yourself for a month as an actual experience and not a thought experiment!
Yep, to be capital efficient you need capital, and it's one reason having X amount of money today is worth more than having X tomorrow. Unfortunately it's such a fundamental problem that it will exist as long as there are scarce resources.
I remember when I first moved into my poor/gentrifying neighborhood of Manhattan, I went to buy light bulbs at the local pharmacy. I picked out all LEDs, and when I got to the check-out counter the lady working there stopped in disbelief. "Sir, you know these are ten dollars each?" I'm like duh, they have a fifth the electricity cost and last 30 times longer, but looking back I can see how this would seem so bizarre to her.
The basic assertion: you make less and end up being charged more is in a sense "correct".
For example: if you're poor, you'll probably shop at a discount retailer and buy discount or knockoff clothes, which will fall apart and need replacing faster than if you had just bought more expensive clothes. Over time, the replacement costs will add up and you'll "pay more" for clothes.
Another example: if you buy in bulk, you can get some items cheaper, but poor people tend to buy in small quantities (e.g. cigarette and alcohol "singles" are a phenomenon that only exist in poor areas for example)
This all sounds kind of stupid, but there's a rationale for it that makes sense from the inside, here's a scenario:
I just paid rent, I have $100 left in my bank account and payday isn't for 2 weeks. I work a physical labor job and my work boots need replacement. Do I?
a) Buy the $29.99 on sale boots at Walmart and hope they last for a couple months?
b) Buy the $259.99 boots at the high-end boot store and they'll last for a couple years?
c) Buy the $84.99 boots at the discount shoe store and they'll probably last for 6 months to a year?
Of course the answer is a). This leaves me with $50 to eat on for two weeks. I can't afford b) no matter what so it may as well not exist and c) leaves me starving before payday.
You count pennies when you're poor, you know exactly how much small amounts of things cost because you spend all your time buying small amounts of things and balancing out the bottom few rungs of Maslow's Hierarchy of Needs against your daily purchases.
Getting out of this cycle is very hard. It's not like you can save up enough to be worthwhile. Even with $5/mo left over at the end of every month, it takes 52 months to save up to buy the b) boots.
This means also that you live in a constant state of emergency. Literally everything is an emergency -- and this short circuits your ability to prioritize and make what seems like rational decisions. It also means that whatever spare money/time you have you may as well spend on stupid bullshit because you've convinced yourself it won't make any difference anyway.
It really is a vicious cycle.
What you are describing hardly seems like a prevalent phenomenon.
You'll see that the mean goes from 245-568 as income goes from <$5k to >$70k. The amount spent rises, but the share of income goes down from 1.0 to .6.
Fresh fruits and vegetables on the other hand price out differently, with a share of almost a constant .6.
As I'm sure you know, fresh vegetables from a cheap neighborhood grocer (that may have questionable origin and freshness) are cheaper than hand cared for organic vegetables at Whole Foods, kept in environmentally controlled and frequently moisturized bins. They aren't the same product, and have large price disparity, but a product is available at every income bracket where the price takes up the same share of income.
For milk, this isn't necessarily true. As an example from my local area, a gallon of 2% milk at Walmart is $2.69 while at my local high-end grocery it's $3.39. About a 25% price difference. However, the demographic likely to buy at Walmart vs. likely to buy at my high-end grocer is going to have an income disparity much larger than that percentage. So for poor people, milk costs more because the floor price of milk can't get low enough to make up such a small share of poor people's income.
There's other phenomenon too. Have you ever gone into a Walmart and notice the aisle of nothing but sample/travel sized hygiene products? It's not because Walmart shoppers are more likely to travel, that aisle exists for people who can't afford the percentage of their income to buy the full product -- even if it's far cheaper per use. You'll find these kinds of packaged items more and more as you go down the local income scale.
The equation a poor person is trying to solve is this: do I pay $3 for milk and get calories for a week, or do I pay $3 for a full bottle of shampoo? Food is more important than hair, so milk it is. I've been at income levels where $3 really does matter.
Or have you ever looked at a pack of gum or cigarettes or a six-pack of beer and seen "not for individual resale"? This label exists because of the phenomenon in poor areas of stores breaking up packaged items and selling them individually at a markup. You may have been to a store in a bad part of town where the beer section has six-packs and maybe a couple single bottles/cans. Now imagine a store where everything is single bottles/cans, and the brands are ones you've never even heard of, and because they only sell to the bottom of them market (we're not talking about a craft beer store here). Oh and they also can't call themselves beer because they aren't, their a "malt beverage". And when you go to check out you interact with the clerk behind bullet proof glass.
Here's another one, if you are poor, you are less likely to have good credit, meaning you either won't have a credit card, or will have one with a high interest rate. If you are poor, your credit card will have a low rate, and even better you'll get value back for using it. This means the cost of borrowing, even for a short period, is far lower at higher income levels both because the interest is lower but also because of the value you get back (e.g. I get a check back for a few hundred dollars every year from my American Express card just because I use it, when I was poor I had a credit card that not only had 20% interest, it penalized you for paying it back early, and I had to pay $100/year for the privilege of having the card)
I still have weird habits from that time in my life. When I go to hotels I take all the shampoo and soap home even though I have no problems buying decent shampoo. It drives my wife nuts, but I feel weird leaving behind "free" items knowing that each one would be $1-$1.29 each at the store.
You are probably right about lending, however. The poor tend to not pay their debts and that will drive up the cost of lending to them.
Let's say a pack of cigarettes is $7. In poor areas you can often find "singles" or "loosys" for sale at $.50-$1. They're exactly what they sound like, single cigarettes. Usually the store owner just opens up a pack and sells each cigarette individually. Poor people with little money will buy the singles and thus 20 singles will cost $10-$20.
This isn't something I'm making up, this actually happens in poor areas. Often times there's not even a store owner and it's just an individual trying to make some quick money and turn a profit (this is what Eric Garner was trying to do, sell loosies at a markup).
You can go on endlessly with this kind of thing. If you can imagine a packaged product, it's probably being split up and sold as singles at a higher price with respect to the packaged price, and almost always in poor areas.
I've even seen stores that seem to make a racket out of buying stuff in bulk from Costco, breaking up the package and selling singles for 2-5x the original price. Shelf after shelf of Kirkland signature bottled water, toilet paper, detergent etc. Poor people don't have Costco memberships even if getting the membership and just buying non-perishables in bulk would save them money in aggregate. The store had a whole repackaging operation in back where the singles would be rewrapped in new shrinkwrap, but they didn't bother removing the label.
There are many items where poor people pay more for smaller quantities, and end up buying much less of that product over time.
"Sachet marketing" will sell individual servings of shampoo to poor people. A poor person can't afford a cheaper-per-portion bottle, and can't afford to buy a sachet every day, and so will wash their hair once a week (52 sachets a year) instead of buying bottles and washing their hair - with 2 passes ("rinse and repeat").
The total spend is obviously less, but it's not controversial to suggest that poor people spend more for less than wealthy people, but if you compared similar use the poor person would have to spend considerably more.
But this is nonsense. The federal reserve study doesn't study rich and poor at all - it studies the unemployed vs employed. Specifically, the article shows that unemployed people spend less time shopping than employed people. Is the article really claiming that unemployed people have less leisure time?
In fact, the article actually claims that reduced working time causes a (small) drop in shopping time.
"For instance, total shopping time for households with an income between $100,000 and $150,000 (category 5) is 5 to 7 minutes greater (per day) than average shopping time by an individual in a household with income in the $0 to $24,999 bracket (category 1). After controlling for various individual characteristics (column I), this is robust to including both time and state (columns II and III), as well as labor force status dummy variables (column IV)."
"The results indicate that a 1 minute decline in market hours is associated with a 0.04 minute decline in shopping time."
The correlation between income and shopping time is simply not caused by leisure time. This should hardly be surprising - leisure and income are inversely correlated (i.e., the poor have lots of leisure, the rich very little).
Do you have any data for that? I rather doubt that it is very solid if it exists at all. There are a large number of poor people working more than two jobs and more hours than the rest of the "middle-class". Additionally, many of the jobs from the upper end of the middle-class tend to often require longer working hours.
http://www.bls.gov/opub/reports/cps/a-profile-of-the-working...
Doesn't cover multiple jobs, but it shows most poor folks don't work at all, and a little under half of those who do are part time.
Do you have any data suggesting a significant number of poor people work multiple jobs, or work more than 50 hours/week?
If by "most" you mean ~10% (or were you including children and old people?)
>I can't find any solid statistics, but there is certainly evidence for a 'significant number': http://poverty.ucdavis.edu/policy-brief/low-wage-work-uncert...
I wasn't specifically thinking about people below the poverty line, but was rather intending to include the "working-class" as well.
He's wrong to say that the study only looks at employment status. It looks at income and a number of other factors as well (mainly, income and time spent working).
However, he is right that the article's conclusion is mis-represented:
"Overall, we don’t find much evidence in favor of a negative correlation between income and shopping time, particularly comparison shopping possibly motivated by locating better prices. As a matter of fact, whereas total time spent purchasing goods and services is about 20 minutes per day, the component of shopping time devoted to comparing prices and products seems to be extremely low in the data. It is about 4 seconds a day on average, given the large number of respondents declaring zero. Moreover, nonparticipants and the employed spent more time than the unemployed in this activity. This may indicate that most of the effort made by consumers in the goods market is unrelated to uncovering better prices."
Also, I question "The wealthy build a better sense of when prices are low and deals are good." - the poor are very aware of how much their food costs, for example. Wealthier people aren't, because they're not counting pennies. A question illustrating this, taken from Yes Minister: "How much is a pound of margarine?" The really wealthy, the 1%, aren't going to have a good idea. But the poor are aware of the costs of their staple foods.
The underlying point of the article isn't a bad one, but extrapolating "this dude orders clothes sight-unseen from his smartphone every two weeks" into "the poor have it so tough" is a strange path to take.
I've heard anecdotally that's true, but I've never seen data.
I've also heard about the price discrimination that goes on based on the browser (Safari = user with $$$). Are we sure it wasn't just that?
I bought two tablets to go homeless. I currently own a tablet and a laptop. But I assure you I am really weird for a homeless person. Tablets are not normal on the street. Cell phones, including smart phones, are very normal on the street.
I can't give you precise figures and this is not a formal survey. It is firsthand personal observation. I spent six months in downtown San Diego participating in various homeless services programs. This exposed me to dozens or hundreds of other homeless individuals at a time. (The participation at one of the meal sites was upwards of a hundred individuals per day and I participated in that regularly for about six weeks.)
Does that work for you? (Sincere and respectful question.)
In my perspective, the coupon is considered as optional information and is not shown on the mobile site for the obvious reason that it simply wouldn't fit.
To me it reads like a conspiracy theory about something that was really a simple design decision.
We were part of the YC Summer 2015 Class. Link to our homepage here: https://paribus.co/
Was pretty surprising when we first saw it, but have seen since that lots of sites now serve different prices/coupons depending on the device you use to access.
I wonder how much of their total traffic comes during the work day, from office computers.
However, the article is a poorly written piece of PR. It makes several mathematical errors, mis-represents the study on shopping time, and fails to provide any evidence to back up it's critical point of "e-commerce today acts like a regressive tax".
Why is this crap on HN?