Another Pay-as-You-Wish Success Story

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.”

(Hat tip: Brian Doelle, via BoingBoing)


frankenduf

the movie clerks has a pay-as-u-wish convenience store- the theory there was that people assume someone must be monitoring, so they pay- the irony is what they're really saying is that people assume noone would be stupid enough to have a pay-as-u-wish convenience store!

lucas

there is a pay-what-you-wish deli in downtown denver as well. At least there was when I lived there a year ago.

Nick

There is a pay-as-you-wish restaurant in Salt Lake City. They have a suggested amount. I have eaten there a couple of times when I have been in SLC. You can also pay for your meal by working at the restaurant. Here's the website: http://www.oneworldeverybodyeats.com/

A E Pfeiffer

I wonder whether part of the secret to a successful "pay-you-want" venture is that the consumers have a vested interest in the producer staying in business. That might explain why they're willing to sacrifice the short-term gain of getting something for nothing for the longer-term benefit of being able to get their bread, coffee, music etc. from there again at a reasonable price tomorrow.

It might be interesting to find out whether these consumers see themselves as shareholders rather than customers - maybe they're "investing" in a business model they find interesting and worthwhile.

Partsfather

I heartily agree with all the positive comments about John Bergen's wonderful City Cafe Bakery. Having been a regular customer at "The Cafe" (now two locations!) for most all of those eight years, I've come to appreciate what a truely unique and pleasant enterprise it has become.
While certainly interesting in itself, their "on-your-honour" form of payment (their till is a coin-style fare box liberated from an old Toronto streetcar) is only one small factor in this success story. Plain, old-fashioned hard work, a terrific concept, sound business management, great staff, a unique and eclectic mix of customers, a welcoming ambiance and great products, not to mention John's infectious personality itself, have all contributed in making this place a roaring success.
Now, if someone could only convince Bergen and Patti to play the Blues on the stereo, life would truely be complete...

John S.

Post 27, your comment about self checkouts is interesting. We have those as well, but there's usually 1 cashier per 4 registers. The cashier also aids customers having trouble, checking ID's for alcohol, etc. But he/she also is an encouragement of proper scanning - sneaking something through runs the risk of being seen.

I wonder how well a supermarket would do with the same sort of model, where there is no cashier and payment was solely on the honor system. Would the savings in labor make up for losses? I suspect not.

It appears to me that the successful models of pay as you wish are for low cost items; bagels, coffee, music. I would expect that businesses with much higher expenditures would not function.

I think that the honesty of people needs to be put into context for the amount of money at stake - ripping off a coffee shop to save $5 would seem to be much less rewarding than an opportunity to rip off a store for $100 with impunity.

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Nina

I hadn't read this post! Wonderful.

Except a business like that would NEVER work in Brazil. EVER. It's just the way people are around here... I wouldn't go as far as to call Brazilians dishonest, but there's just a general sense of 'I-can-get-ahead'-ness that won't leave us. It's almost a tradition, and definetely part of our culture already.

But I'll make sure to pay next time I happen to be in Seattle. :)

Don McKinnon

My wife and I have been to the City Cafe many times. It is a great place and everyone in the city loves it and we would like to go more. It's just not in a convienant location for us.

When first encountering the pay-by-yourself model, it was a bit confusing and my wife had is-this-for-real type feelings. As honest citizens, we paid what we believed to be the right amount.

I don't think this model is completely un heard of though. Here in Canada we have self-checkout's at all our major supermarkets. We self-scan our items and bag our own groceries. Although the machine tells us how much to pay, it is up to the honour system to scan all the items and not just walk through the area with our cart full.

Mathieu

Would publishing the financial results of the store influence payement rates? If people can be convinced that everybody makes a fair share of money (workers, owners, clients,...) will they be more honest? Or maybe the other way round?