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Thursday, December 18, 2008
The Cost of a Price Hike
Nickels and dimes add up fast, and while consumers might not be aware of the extra charges at first, they're sure to feel it in their pocketbooks later. Bob Sullivan coins it "gotcha capitalism" in his book, Gotcha Capitalism: How Hidden Fees Rip You Off Every Day and What You Can Do About It. Whatever you call it, tacking on hidden fees is an exploding trend, says Sullivan. "Companies under intense price pressure have figured out that they can soak consumers by giving them a teaser price, hiding the real price of things and tacking on fees later."
But with rising costs, how do entrepreneurs stay afloat without passing along the fees to customers? Monique Hayward, founder of Dessert Noir Caf & Bar in Beaverton, Oregon, is feeling the pinch as her own costs go up. The price of a 5-pound bag of chicken has increased from $8.65 to $10.07 in less than a year, and the Dungeness crab, an irreplaceable ingredient for her crab dish, increased by $10. Unable to swallow the price increases any longer, she has started charging for extras, such as baguette slices, pita toasts and refills on select beverages and has increased the prices for adding meat. Says Hayward, 38, "I felt I could differentiate from my competitors who were raising prices across the board if I could just simply target the items that were extras and that truly did cost me a heck of a lot more money than before."
Adding fees may be inevitable for entrepreneurs doing business in today's economy, but gotcha capitalism can be avoided by removing the "gotcha" from the formula. Be clear about the extra fees, recommends Sullivan.
Hayward's servers are trained how to explain the price increases to customers, and most of the time, they find that customers are very understanding. Hayward hasn't noticed a decrease in business as a direct result of her shift, in pricing and she still rang in sales of about $325,000 in 2008. "Have a good explanation for your customers as to why you're doing it," she says. "Most customers are feeling the same pain in the marketplace with the increasing cost of food and energy, and I think they'll be sympathetic."
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FOX Translator
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It's time to let you in on a dirty little secret: You may not own the stock you own. That's right, if you invest with a brokerage firm, the shares you bought are almost certainly not held in your name. Technically, they're held in the name of the Wall Street firm you do business with, hence the term "street name."
No, you haven't been robbed. Ultimately, the decision to hold shares on the books under a different name doesn't affect the economic ramifications for you. You¿re listed as the "beneficial owner," even though the firm is the official owner of the shares. But, you are giving up some rights, and investors concerned about good corporate governance might want to get that stock back in their own names.
Here's the problem: If your stock is technically owned by, say, Merrill Lynch, then Merrill Lynch gets to do things with it that might work against your wishes. Take short selling. Investors who want to sell shares short need to first borrow those shares. The lenders are often the big Wall Street firms that are handing out Street-name shares. So, if you feel that a company you own is a victim of aggressive short selling, chances are your own shares are being used to fuel the shorting.
Also, your brokerage firm can cast ballots on some corporate matters affecting a company without getting your input. Technically, this can only happen in votes considered ¿routine¿ by securities regulators. But, there's a big catch: some big events, like board elections, are considered "routine" under law.
The good news is that you can easily fix the Street name problem: Just request that your brokerage firm makes you the listed owner of the shares. If they refuse, find a new firm.
