Last week, I took my remote key to my 2015 Toyota Camry to the Toyota dealership. I wanted a new battery. I’d done it before. They had installed it for me (I’m not good with such things) and the overall charge with tax was about $11 or $12. The remote with the old battery was hit and miss–not working at the start of the day and then working through most of the day. I wanted it to work all the time.
After the Toyota guy installed the battery, I went out to the car and tried it. It didn’t work even though it had been working before we replaced it. So he tried another new battery. Same result. He suggested that I set up an appointment to get the key fixed. I said that probably wasn’t the problem because it had just worked a few minutes earlier. I told him that I wanted him to fish the old battery out of his trash, replace the new with the old, and give me a refund. He did.
A friend suggested that I go to a good hardware store. Saturday morning I went to my local Ace Hardware store. (First time I haven’t worn a mask in that building in over a year: it was glorious.) The guy said he had the battery and I asked him if he could install it. He said he could as long as I released him from liability for breaking it. Since I figured he would be less likely to break it than I was, that was an easy choice. I had a further choice: pay about $4.50 for a new battery or about $8 for 2 batteries. It wasn’t a hard choice: I told him that since my experience was that a battery lasted about 3 years, by the time I needed to replace this one, I would have misplaced the second one. So I took one battery. He took apart my key, took out the old battery, and replaced it. I ran out to the parking lot and clicked the key, and voila, it worked. Delighted, I came in to pay for the battery. Although the guy had on his mask, I think he was smiling with delight that it worked.
I realized, though, another reason not to have bought the second battery. Let’s say I had and that 3 years later, I needed to replace the current one with the 2nd one. As I said, I’m not good at that, and so what would I have done: gone back to the hardware store, shown them the receipt, and asked them to install the new battery for free? That might work, but it might not. I would be taxing their good will. But if instead I buy a new battery 3 years from now and ask them to install it, the odds are very high that they will.
So the marginal cost of the battery being replaced next time will be about $4.50 plus whatever amount the price rises by. By contrast, if I had taken the second battery, the marginal cost looking forward at the time of purchase would be $3.50 plus the cost of finding it 3 years from now plus the cost of taxing the hardware store’s good will. It was this third factor that I didn’t think of and that, when I thought of it, made my decision to buy just 1 battery look even better.
READER COMMENTS
Alan Goldhammer
Jun 21 2021 at 8:27am
LOL!! We have three Hondas in our local family (the fourth is in Oakland, 2600 miles away). Fortunately, they all take the same battery and I’ve changed them all at least once. It’s actually very simple though each key may be different regarding how to open it (your car manual will tell you though it’s often obscure as they want you to go to the dealer and pay 3-4 times the cost of DIY).
A lot of people who have keyless start buttons get worried that the battery may run down and they cannot start their car. This is wrong. The battery only powers the key fob to send a radio frequency signal to the start button receiver (this is the same way it works for door lock). In the event of a failing battery just hold your key fob next to the start button and press it, voila, your engine starts.
One other note, all this kind of gadgetry relies on computer chips within your car and is one of the reasons car production has slowed down or even stopped for some models. There is a shortage of computer chips for a variety of applications.
Tom DeMeo
Jun 21 2021 at 9:10am
Odd that you thought you saw one strategy as taxing good will while the other didn’t.
This is one of the great problems of the evolution of our economy. You managed to extract an unreasonable value from a retailer based on a value proposition that is disappearing.
In three years, that guy may not be there. That store may not be there. No one can afford to help you via a rational economic decision. That guy gave you that out of a habitual ethic that we are all destroying, including you.
David Henderson
Jun 21 2021 at 10:19am
You wrote:
Huh?
Evan Sherman
Jun 21 2021 at 10:46am
If I understand correctly, what you are saying is basically: ‘The value of the service provided by Ace was way, way more than DH paid for it, either indirectly or directly. Or, in other words, there is an externality here that is very positive for DH and very negative for Ace – in that Ace does not seem to have a way to get consumers like DH to pay for the service they are really providing. Therefore, Ace traded badly. With a culture in which those bad-for-Ace trades predominate, Ace will inevitably close. And then consumers like DH will have less options for the needed service. Short term win for consumers like DH, long term lose-lose.’ Don’t want to paraphrase unfairly, so please advise if I am missing something important.
I would argue that the above misses at least 2 important points:
Even if Ace is missing out on an opportunity to charge DH more for the service, Ace could still be happy enough with the trade for the batteries at their marked-up price (via the employee’s time to sell the batteries). Plus, the externality of the service might not quite be an externality if it helps to market the Ace brand to DH. Maybe DH is likely to keep coming back to Ace and buying more goods at a price that benefits Ace. (I’m pretty sure that’s kind of their whole marketing shtick – they’re the “helpful hardware place” [insert jingle].)
Even if we accept that Ace’s inability to charge DH enough for value of the battery replacement service is in fact ruinous to Ace (again, not so sure about that), that is very much Ace’s problem, not DH’s . It would be irrational for consumers like DH to pay more than they need to. Corrolary to (2): If this externality is indeed a huge problem for Ace, such that Ace can’t figure out how to charge appropriately for a service that consumers really value and need, then eventually, some competitor to Ace will figure out how to charge appropriately. If that’s true, then consumers like DH driving Ace into the ground by exploiting their free service is a useful part of the business cycle.
Tom DeMeo
Jun 22 2021 at 8:12am
Evan – I think you did an excellent job of fleshing out the explanation.
You claim I missed at least 2 important points. Well, people write books about such topics so I would agree my post was not thorough. But the two points you cited were not compelling.
The informal, customer service friendly retailer strategy(as opposed to a more costly concierge style approach) appears doomed. Not by me, but by the marketplace. The Ace brand is choosing the only option open to them (flanked by online and the HomeDepot/Lowes behemoths), but that option is shrinking. I understand the marketing strategy but I’m fairly confident that it will continue to occupy a smaller and smaller space in our economy. Retail faces a massive rest over the next 10-20 years.
I also understand that it isn’t DH’s problem to fix, and that he has every right to pursue the marginal decision that suits him best. I only made the point I did because he addressed the exchange from an economic point of view, and discussed “relevant margins” and “taxing their good will”. I thought it was important to point out that the good will option is on precarious ground.
Evan Sherman
Jun 22 2021 at 8:47am
To your point, a comment thread may not be the ideal forum for comprehensively explained quibbles and parsing of sub-claims, etc. (I certainly did not intend to imply that your original response had a duty to be comprehensive.) So I will abstain plunging us both into a point-by-point back and forth. 🙂
Broadly speaking, then, I just fail to see what’s sad or wrong with the state of an economy in which Ace (and the model of de facto free service) fails.
*There are many examples of brick and mortar locations that manage to charge a large premium for goods as a way to essentially charge for intangibles like customer service and the shopping experience. Go to any hip sector of any major city to see scores of examples (and there are smaller but still relevant such sectors in smaller towns). You’ll walk out of a hipster tea shop with new knowledge about blah-blah-blah regional tea’s blah-blah-blah and tea at 3x the normal price for the good. These premium prices on goods, and differentiated shopping and service model, hold back the de facto commodification of goods at the really big chains like Home Depot for businesses that suceed at adopting the model.
*If customers really do highly value de facto services like in person battery replacement, then stores like Ace could charge a (higher) premium for the underlying goods.
*If businesses like Ace fail to charge what these de facto services are really worth to the consumer, and thus fail under the weight of low-servce cheap-price titans like Home Depot, then another provider will find a way to bring to market the services that consumers value (because consumers value them).
*Conversely, it’s also possible that the average 2021 consumer values these de facto services less than we have been accounting for. As the many instances in the comment thread seem to indicate, info on the internet teaching users how to replace their own batteries abounds. That pattern, I think, extends to lots of other little de facto services (e.g. guidance on product selection) stores like Ace provide. So if the internet teaching people stuff means that people value those de facto services less than they did, then yes, stores that rely on them will suffer. But the suffering of individual businesses seems inevitable when people no longer value the thing that a business sells. It’s not obvious to me, furthermore, that a culture in which people learn to do things is worse than a culture in which stores instead perform those services for free.
_____________
I mean, I suppose anything ending is sad, so I’ll be a little sentimental if/when my local Ace fails to adapt and closes. But I’m not really worried that the economy will be a poorer place.
And, even if the failure of businesses like Ace reflects cultural change, I’m not necessarily (on net) sad about that cultural change, because the new cultural values are also good.
Jon Murphy
Jun 22 2021 at 4:52pm
You got it exactly backward, Tom. The marketplace is encouraging friendly retailer strategy. To quote FA Hayek: “The function of competition is here precisely to teach us who will serve us well…” The local retailer knows they are unable to compete with the Big Box Stores on price, so they find other margins to adjust along. That is to say, they find other ways to compete. Their method of competition is to offer friendly services like this. Lowe’s method is to offer cheap prices to DYI-ers. The market encourages both behaviors as each sortes sort out who they can serve well.
Tom DeMeo
Jun 23 2021 at 8:55am
Sounds like a nice tidy theory, but it isn’t going to work. The problem is that such a market presents the consumer with an obvious strategy. Buy almost everything you need from frictionless retailers, then head on over to your friendly Ace hardware man when you need someone to put your $4.50 battery into your $350 electronic key for your $65,000 car.
The economic problem is that this is not a smooth continuum. Service doesn’t work like price. There is a threshold after which it deteriorates fast. My concern is we will be caught in an in-between zone where frictionless retail will be efficient enough to destroy widespread service based strategies, but lots of little stuff, like this key battery scenario will still be half baked. The huge efficiency gains will be negated by lots of trivial problems too small to fix. It will take a while to get past this stage.
Jon Murphy
Jun 23 2021 at 10:38am
Except it is working, as the example shows: both types of stores (big box and local) exist. Indeed, this is how firms and individuals around the world compete with others: they find their competitive advantage and exploit it.
I’ll give you another example (I can give a billion of these). There’s a distillery in Washington, DC called One-Eight Distilling. I went there one day for a tour. Afterward, I was talking to the founder and master distiller. I asked him: “How do you compete with the big distillers?” He replied: “I’ll never beat them on price. They have contracts, machines, and operations I can never match. So I don’t even try. Instead, I make my liquor unique. With Jim Beam, you pay a low price but get an OK whiskey. With me, you get an experience.” And it is unique. A gin from One-Eight is unlike anything you’ve had before. He found the margin he could adjust along and could beat the Big Boys (flavor) and did.
So, then, why doesn’t that happen if it’s so obvious? Why haven’t retailers figured out a solution to the problem? Perhaps they have: they provide free, simple services on products they sell (as is the scenario David describes). They can’t compete on price, so they compete on service.
MarkW
Jun 22 2021 at 4:12pm
I think you may be grossly overestimating the difficulty of replacing the battery. I happen to have a Toyota fob right here — I just opened it with the end of a fork (still sitting on my desk from lunch) and snapped it back together in ~10 seconds. Replacing the battery while I was at it would have taken a few more seconds. The battery is a standard lithium disc battery used in all kinds of electronics. Changing David’s battery probably required no more labor than ringing up the sale and making change or running his credit card. And there was probably plenty of profit margin in the purchase — you can buy a blister pack of a dozen on Amazon for $4.50. Also it was a good call in not buying two batteries. In three years, the second battery might not be any good even if it could be found (which may have been the problem with the batteries the dealer was trying to install).
Fazal Majid
Jun 21 2021 at 9:53am
CR2032 button batteries are everywhere, and unlike AA or AAA they don’t have rechargeable equivalents. You should always keep a couple handy at home. Shops are not always open when you need them.
David Henderson
Jun 21 2021 at 10:18am
I can easily do without shops for days. I was unlocking the car the old-fashioned way for the previous 2 weeks. It seemed not to work in the morning and then worked all day.
Evan Sherman
Jun 21 2021 at 10:30am
Yes! If anyone is ever in any situation in which one can save a) one’s own time and b) potential labor costs by paying relatively more for goods – presuming the current environment of expensive labor/services, cheap goods – one should always go for that option. Especially when the $ amounts are so low, the risk of having to pay full price for a skilled laborer’s time to fix something should always be appropriately feared.
Maybe an over-enthusiastic overstatement, now that I’m looking at it, but honestly, I think it’s a pretty decent heuristic to start with for most man-on-the street consumer trades.
Dylan
Jun 21 2021 at 10:34am
I didn’t realize the lifespans on those key fob batteries was so short. The very first keyless entry system I ever had was on an ’89 Jeep. To the best of my knowledge, we never had to replace that battery over the 16 years it was in the family. I know I didn’t in the 5 or 6 years when I was the primary driver. Of course, the range was a lot shorter back then too. Had to be right outside the door and aim the fob at the sensor.
Alan Goldhammer
Jun 21 2021 at 3:15pm
We have had keyless entry cars for quite a while. It’s been my experience that the batteries last 3-4 years on average.
Dylan
Jun 21 2021 at 4:05pm
The newest car I’ve ever owned was a ’93. So, I’m a bit out of the loop on new tech. I think I’m now at the age where technology advancements seems to mean mostly taking away things I like and replacing them with things I don’t care about.
TMC
Jun 21 2021 at 11:18am
It would be worth the extra dollar for me just to get a fresh battery. If you were to buy two, you’d be replacing the battery with a three yrl old battery.
diz
Jun 21 2021 at 12:38pm
Yeah, I used to think this was a bid deal but it’s like one click in the right place to pop the fob open and a battery you can buy at target for a few bucks. They have youtube videos out there for most cars.
Just takes a little confidence!
Dylan
Jun 21 2021 at 12:41pm
Had a similar situation today. Looking at new phones and there is one on sale at Amazon today for a substantial discount over the normal price. However, the battery is non-user replaceable. So, I wrote to the company to find out how much it cost to replace the battery. The battery was $15 and the service they said was about $30. $45 total seemed like a pretty OK deal, however, I found out the catch was that I’d have to send the phone to them and the turn around would be about 10 days. Since I use my phone extensively for work, those 10 days without it wouldn’t really be possible and I’d have to figure out an alternative solution that would likely cost far more than $45 in hassle. Upshot, I decided to not buy the phone.
*The marginal cost calculation is complicated by the fact that it is hard to find a phone these days that doesn’t have this limiting factor. And the ones that do not, tend to have other major drawbacks, Makes direct comparison difficult.
Alan Goldhammer
Jun 21 2021 at 3:20pm
Almost all new phones do not have ‘easily’ replaceable batteries. It’s a result of higher performance chips and users wanting smaller lighter phones. You can replace the batteries in almost any phone as there are instructions on the Internet about how to do this. The problem is you need to be very adept and one false move will brick your phone. I’ve done it once a couple of years ago.
Depending on where you live there might be some businesses that will do this for you in real time. Normal turn around time if you have an appointment is about 60-90 minutes. Check to make sure they guarantee the work.
Dylan
Jun 21 2021 at 4:15pm
I found that there is a place that I can take my current phone and they will replace the battery for me for a cost of $130. Hard to get over the sticker shock of that, since all of my phones before this one cost somewhere between $10-$20 to replace the battery. And I’ve averaged about 5-6 years of life on my phones going back to 1995.
However, thinking on the margin where the choice is between $130 for a new battery, or $350 for a new phone, plus all the time to get it setup and working the way I like (normally takes a couple of months before I’ve gotten the customizations dialed in the way I like).
But, there are additional costs to the battery swap as well. I need to ride into the city and wait around a few hours while they do the repair. Plus, there is a risk they will wreck the phone (they told me they’ve never even heard of my phone before).
Evan Sherman
Jun 21 2021 at 4:44pm
A lot here also depends on what one values in phones. For me, an old grumpy millenial, I have seen limited substantive reason to value newer phone models after, say, the iPhone 5 (or equivilents from competitors). That is to say, while smartphone features from the last several years are nice, they are not really interesting enough to me to compel me to get new phones. So for me, the limiting factor on phone life is generally the life of the battery.
And while the limited comptuting power of the phone vs. operating system updates does ultimately drag old phones down, I feel like the effect is fine to manage (declines from trivial to acceptable to annoying) until the lifecycles of about 2+ batteries have passed.
So for me, one $130 battery replacement for a $35o phone would be a great value.* It’s like paying $480 for a phone that lasts twice as long, or 31% off the total cost of 2 phones. But then replacing the battery a 2nd time has drastically diminished returns.
[Plus, for you, I gather the time spent on the new battery is less than the time spent re-configuring a new phone.]
But some people are more clever than me and get utility out of newer and better phone features, so their calculations should be different.
*All of this disregards the whole techs-ruin-the-phone scenario – which, yeesh. I guess I don’t know enough to know how likely/common that is.
Tom West
Jun 21 2021 at 6:18pm
For me, that would approximately $1,000 (lost time in ransacking the house + frustration in knowing I had deliberately put it somewhere where I would be able to find it 3 years later, but I still can’t find it!).
At least in my world, David Henderson made the right call by a mile.
Evan Sherman
Jun 22 2021 at 8:54am
Yes, this. This happens so often that I have an informal formula guide me: (Time spent looking for a replacement I think I have in storage before just buying a new one) = (X) (The $ value of the replacement). Not sure what X is – that’s the squishy part. But I know that I will look for screws I think I have for about 10 minutes before I drive the 7 minutes to just buy more. Even that I think is a bad trade some of the time given the low price of screws.
My wise friend actually figured out that it was cheaper and more time-efficient over the long term to buy at least 10 of most imaginable (home-owner-sized) screws, nuts, bolts, and washers regardless of any specifically planned upcoming projects. The $ lost on sizes never used turns own to be less than the $ value of his time driving to the store to get hardware.
Evan Sherman
Jun 22 2021 at 9:12am
*although, to be clear, my friend’s home hardware section does require him have a much better organization system than I do.
AlexR
Jun 21 2021 at 6:22pm
My 2013 Hyundai Sonata does not have a “manual” option for ignition, so if the battery on the remote dies, the car won’t start! I learned this the hard way a few weeks ago when I learned my wife was in the ER and I wanted to get to the hospital fast. In the perfect storm, the remote battery died the same day. Until then, I hadn’t realized there was no manual way to start the car—the associated physical key worked to unlock doors but there was no ignition lock on the steering column or anywhere else. I had to walk to a drugstore a few blocks away, under trying circumstances. I don’t remember how much I paid for the battery, but the main component of the marginal cost was the foregone use of the car—having to walk to the drug store and back while I was very anxious and in a great hurry. I bought two batteries and keep one in the glove box. I don’t relish the prospect of the battery dying again and not having an immediate replacement. Maybe I should have bought four, for redundancy in case a first or second replacement fails.
Alan Goldhammer
Jun 22 2021 at 10:30am
That would be surprising as almost all models have a manual way to start the car in the event of a dead key fob. Check this video. Check the owners manual if you still have the car. I know for my Honda HR-V there is a simple way to start the car if the battery is weak or has failed.
AlexR
Jun 24 2021 at 4:51am
It is indeed surprising, but true. The owner’s manual (which I checked at the time) makes clear through diagrams that some versions of the car have an ignition lock on a particular spot on the dashboard, whereas others have a push-button instead on that same spot, which works only when a key with working battery is present in the car. Reddit counsels that putting the key fob directly onto the push button may work, if there is any trickle of charge left in the fob. Didn’t work in my case. This is, in my view, a terrible design flaw. I hope it’s been fixed in newer Sonatas, and I will certainly check if I consider buying the model again. Other than this, the car has performed flawlessly for eight years.
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