Pay-as-You-Wish Success Story

Another Pay-as-You-Wish Success Story
By STEPHEN J. DUBNER
We’ve written before about pay-as-you-wish commerce, most significantly the case of
a bagel man in the Washington, D.C., area, but also a coffee shop in Seattle and three
instances of pay-as-you-wish download-able music: Radiohead, Jane Siberry, and
SongSlide.

Now here’s another baked-goods pay-as-you-wish scheme that’s worth looking at,
concerning a bakery in Kitchener, Ontario, called City Cafe Bakery. Below is a good
description from an article by Karen Hall in Bakers Journal (the “Voice of the Canadian
Baking Industry”).

There are a few things worth thinking about when you read any given pay-as-you-
wish story. On the plus side, there’s the opportunity cost of not having to hire
someone to work the cash register.

On the minus side, there’s the issue of “survivorship bias” — i.e., if you’re reading
an article about a pay-as-you-wish business, it is inevitably a business that has
managed to survive and perhaps even prosper; but don’t forget all the articles
you’re not reading about such schemes that failed miserably. The particular
incentives in any particular pay-as-you-wish scheme are what determine success
or failure.

Finally, as interesting as the pay-as-you-wish element of this bakery is, I was most
interested in the line at the end about the don’t-answer-the-telephone rule. That’s
something I’ve tried to adhere to for years, and which e-mail has only made easier.

“Everything is rounded off to the nearest quarter with taxes included where applicable,”
he says. “So every dessert is $1.50 (tarts, brownies, and date squares), every pizza
lunch is $5, every beverage is $1.25, every loaf of bread is $2.75 (Italian sourdough,
multi-grain, and raisin bread on weekends), croissants are $1 each, and bagels are
three for $2 (plain, sesame, and multi-grain).”

The bakery conducts audits every six months and [John] Bergen says only once did
things come up short.

“Our theory is that two percent of our sales are being ripped off. ‘Ripped off’ in the
sense that there are people who forget to pay or they make a mistake in paying, and
then there are people who deliberately don’t pay. And
every so often we have to kick somebody out that we know hasn’t been paying,” he
says. “But at the same time we figure we’re being overpaid by three percent. Some
people come in and want a $2.75 loaf of bread, but they see we’re busy so they throw
$3 in and walk out. Or, although we discourage tips, some people still give them to us.
But because the staff is paid well (the average wage is $15.50 an hour), the tips go into
the general pot.”

The staff will make change if a customer needs it, but Bergen says they will ask the
customer how much they want back because they don’t want to have to do the math.

Nor does staff answer the phone. There is a cell phone that suppliers can call, but the
main phone does not get answered. “When somebody phones, the (voice mail) message
says the mailbox is full,” Bergen says. “We don’t answer it because the staff is here to
produce and it disrupts us.”

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