Economics of a salesman

Today was my first day working at the Apple reseller store and I thought it wasn’t half bad. The people there are pretty nice and it’s a job that is actually related to my interests and passion. Sure, the working hours are pretty long (11 hours) and the pay tends towards the lower end, but working retail is really quite a new, albeit tiring experience and I am here to share some of it.

First off, it was coincidental that my first day at work happened to be on the day of the iPad announcement. So it’s very annoying to see enthusiastic Apple fanboys or even just random people coming into the store and asking about it. Apparently all of them are so desperate for the latest piece of hardware that they completely misread the news – the Apple iPad is not shipping until 60 days later (for the wireless-only model). After the first few “Do you have the new iPad in the store?” and “How much is the iPad going to cost?” (we have no idea as prices for Singapore have not been released) questions, it got really irritating.

Secondly, I think there is a major economic flaw in the commission system that I work under. Right now, I am working with a fixed commission of $X per CPU unit sold (regardless of model, ranging from the cheapest Mac Mini to the expensive Mac Pro) and a Y% commission on all iPod and iPod accessories sales. With a fixed commission selling computers, there exists a major economic problem – in pursuit of maximizing my own profits, inevitably I would be at odds with the interests of the consumer and also that of the store.

In order for me to profit maximize, I would try to sell as many units of computers as possible, regardless of model or profit margins. In the process, I would mostly persuade the customers to go for the lower end models as they are cheaper and thus require much less persuasion to seal the deal. However, these models may not be best suited for the customer as I may be withholding information (imperfect knowledge) in order to seal the deal quickly. So the customer may not get the model that best suit his needs. Also, with a fixed commission per computer sold, I am less likely to go through the extra trouble of selling the higher end models which (I assume) would have a higher profit margin for the store (lack of incentive). So a fixed commission system is not really beneficial to anyone (not even me, since I can probably earn more with a percentage based commission system – depending on the elasticity of demand for Apple products)

Also, because the Y% commission offered for the sale of iPods and accessories is really low, there is no incentive for me to promote more expensive products despite the fact that these products actually result in a larger profit margin for the store. Take the sale of an iPod Nano as an example. The 8GB version of iPod Nano sells for S$228 while the 16GB sells for S$288. However, there is no incentive for me to spend a longer time persuading customers to buy the 16GB model since the difference in what I earn is literally just a few cents more. So if the store wants us to promote products that can rake in higher revenue (and most likely higher profits), they seriously need to increase the commission.

Anyway, these were just some of the musings I had during the period where almost no one comes into the store. Apple iPad review coming soon – I just downloaded the podcast.

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