Sinking to New Lows (or Height$)

Last night while waiting in the checkout line at Home Depot, I noticed a guy (employee) walking around with a cardboard sandwich board on that said something about asking him to save 10% (and we all know what that means). I thought, “great, instead of having the checkout clerk ask you if you would like to enter into bondage with their credit card, now HD is paying some guy to walk around and accost people as they wait in the checkout lines.” Of course, HD seems to pay people to walk around and not know any answers to your questions anyway, so…

But, after I got over the disgust of their new marketing tactic, I started to do the math…

Assuming the guy gets slightly better than minimum wage ($8/hour) and assuming he works a 40 hour week, his monthly wage would be $1280 (based on a 4 week month). Plus any benefits HD offers (if at all).

But, then you have to factor in the 10% HD gives up when you sign up for the card. I’ll be really conservative on my numbers here, but assume the average purchase when signing up for the card is $100 – in that case HD loses $10 for each one of these transactions. I would figure the guy solicits at least one new card holder every hour (on average, probably less during the week, more on Saturday/Sunday).
$10 x 8 = $80/day x 30 days = $2400/month

(of course this also does not factor in processing and related costs)

So, just with this one activity alone, HD is paying $3680 each month (conservative numbers). Why? Is it a customer service thing, covering all of those costs just so someone can save 10%? Wow, are they really that nice?

Not likely. HD is just like every other retailer and is out to make money. They also know that (based on statistics) the average American will a) not pay off the balance and pay interest, and b) a majority of card holders will be assessed a late charge at some point for missing a payment due date.

But, that still wouldn’t be enough to cover the cost, I don’t think.

Maybe HD is banking the fact that people tend to spend 30% more when using credit as opposed to cash (source – a pro-credit card article, but still some good info).

Just for fun, let’s work the math backwards. Let’s take those 240 purchases in one month (for each person that got a credit card and “saved” 10%. $3680 / 240 = $15.33. But, wait, on that $100 purchase you saved $10 (10%). Didn’t you? The problem is, for HD to be profitable, they need to get $15.33 out of you to recoup their losses. So, instead of saving $10, you lost $5.33.

I recognize there are a lot of other variables that come into play, but I hope you see my point. And, I know, none of us are dumb enough to fall for that trick. We’ll take our 10% savings and stick it to HD. Yeah, right.