There Is A Difference Between Evil And Just Absurdly Profitable
techcrunch.com
techcrunch.com
http://consumerist.com/5349663/the-article-cash4gold-doesnt-...
Essentially, The Consumerist makes a strong case that the ads are misleading, that Cash4Gold systematically offers much less than their ads suggest, and that their staff are trained to support this scheme.
Specifically, the staff knows the strategy, their script walks through offering the minimum amount to avoid sending the gold back to the customer, and the staff are rewarded based on the number of customers they can reject.
When former employees spoke out about this, Cash4Gold sued them under flimsy pretenses (defamation). Then, when Consumerist ran an article about it, Cash4Gold sued them too.
Read the article and see if you can find any unfounded or untruthful claims that might be suggestive of defamation.
This is unethical at best, and evil at worst.
There's nothing unethical with making a low offer. If the person is willing to sell it to you at that price, then great, what's the issue?
Cue the glibertarians to spew their idiocy about blah blah blah, consenting adults, blah blah blah. That's fine, and believe me, I'll be pointing and laughing when it happens to their grandparents.
And yes, I can't give you a technical definition of screw. Much like Justice Potter, I know it when I see it. And paying out 20% of value or less is screwing people.
But all negotiations are based on asymmetric information, right?
This is like the cigarettes discussion. Cigarettes kill people. So just tell them so and let's move on.
These guys screw people over. So just tell people and lets move on. There are lots of ways for people to lose money.
I think there is a line where a company would be evil, but I draw that line where high-pressure sales tactics are used for large sums of money, such as time-share sales. These guys are no different than the neighborhood pawn shop.
That's what this is. You send them your gold for their inspection, to see if they want to buy it from you. They look at everyone else's gold and make an offer for your gold. This is an opening offer and is of course going to be very low, but most people take it because they wanted to get rid of the gold anyway.
Most used places are like that. My parents operate a used bookstore; they'll often have people come in and plunk down a box full of books, and my parents will usually make a low offer, something like $5, and the people usually accept it. Not because anyone's getting screwed, but because those people just want to get rid of those books and they're happy with pretty much any exchange. If someone has books that're actually worthwhile, they look up the going rate for that book and price accordingly (which is always significantly below the lowest copy listed so that they can make money off of it). Is this a problem because the person who dropped off the books might not know the item's going rate?
Are used bookstores screwing these people by offering a low price for their items? What about junk car places that will buy your old car for $100 and sell the parts for 6 times that or more? Why is it so different with a used gold place?
For instance, when companies offer mail in rebates that are difficult to redeem (must jump through a lot of hoops, takes a long time, etc) they are misleading you. It's just like a mechanic overcharging you because you don't know how much it should cost.
So it turns out that someone actually measured this and found out that things you might naively assume are in the customer's interest (short forms and long periods until the rebate offer expires) actually decrease redemption rates.
http://news.ufl.edu/2004/06/15/rebates/
(Totally anecdotal evidence: Japan offered me an economic stimulus payment of $120 direct-deposited to my bank account within a week, for filling out a three-line form and stamping with my personal seal, and gave me nine months to do it in. I put it in my closet and figured I'd mail it some day when I got around to it, because my personal seal was at the office the day I got the form. Sure enough, I missed the cutoff by a week. If it had said "You have to stamp this TOMORROW or you lose $120" I'd probably have gotten it done.)
Totally not anecdotal evidence:
http://www.alwinhoogerdijk.com/2009/09/14/rebatedelivery-mai...
http://www.alwinhoogerdijk.com/2009/09/18/rebatedelivery-res...
Take a look at the results of his A/B test: it shows that offering rebates for his software essentially prints money.
I'm seriously considering implementing this in my software -- offering a $5 rebate to bring the price down to $25. The only thing holding me back is the feeling that I'd be exploiting the difference between my customers's self-perception of themselves as organized and their actual organizational skills.
Arrington's comparison to baseball hot dog vendors and $30 hotel wi-fi seems fair though. You kinda feel like you're being ripped off, but you do have choice, and ultimately that creates room for competition.
"We pay 65% of its value" may sound an unlikely marketing strategy to some of us, but it sounds like their target market is similar to the one targeted in Vegas' "Our Slots return 97%" campaign.
There are a lot of folks whose actions are responsible for this state of affairs. Its interesting that while responsibility is diffuse, blame gets concentrated pretty acutely on particular participants in the value chain.
For example, I can't remember the last time someone blamed jewelry vendors for the plight of poor people. Poor people spend more as a percentage of income on jewelry than any other socio-economic group. Poor people have more of their assets tied up in jewelry than any other socio-economic group.
Its interesting to me -- and I mean that, interesting, not the passive-aggressive way of saying "y'all are stupid" -- that we go after Cash4Gold for offering $12.50 for $75 worth of gold when we don't go after Kay Jewelers for selling the $300 brooch the gold is in. Cash4Gold is seen as cheating the poor customer out of $62.50, but Kay Jewelers is just an honest businessman who made $225 off of selling the bauble in the first place.
More broadly: a portion of the attraction to jewelry for poor customers is that it is a value store and access to short-term credit for people who are unbanked. (If you own a $300 bauble from Kay's then you have a $100 line of credit at your local pawn shop which charges you APRs of $STAGGERING_PERCENT.) Jewelry is a TERRIBLE alternative to banking services.
Incidentally: jewelry is a consumption item. Don't buy it with the intention of it having resale value. Don't buy it if you can't afford it.
As far as I can tell, Cash4Gold is taking advantage of people too lazy to make an effort to find someone willing to pay market value for their gold. Phrased another way, their low payments are a convenience fee, just like valet parking or fuff-service gas stations[0]. I see nothing wrong here.
[0] Well, outside of Oregon and New Jersey, at least.
i feel like the process would be more ethical if there was more of a customer feedback process. like, if the customer were informed on the amount of gold and the size of the check before it was in their hand.
regardless of the moral judgment (I personally think its a fine business), it's an interesting data point that neither highland capital partners nor general catalyst have confirmed the financing, despite its size and high profile.