Technology

Episode 633: The Birth And Death Of The Price Tag

JIANG: The whole world I've known is in this price-tag world. Everything has a price, one price.

GOLDSTEIN: But when you take the long view of the historical world, this price-tag world is like a bizarre aberration. You know, for almost all of the history of human commerce - for thousands of years - you walk into a store, and you point to something. And you say, how much does that cost? The guy at the store is going to say, how much you got? You know, everything was a negotiation. And there were good reasons the world was this way.

JIANG: Say I have a store and - I don't know - I'm selling eggs. And a guy walks in, and he looks like he has all day to haggle. And he's really been scouting out the best place to buy eggs. So I sell him a dozen eggs for a buck 50.

GOLDSTEIN: So then, a few minutes later, somebody else comes in. This guy's wearing fancy shoes, clearly does not have a lot of time to haggle. So you sell him eggs for twice as much. You sell him eggs for 3 bucks.

JIANG: Each customer pays what they think is a fair price. I make a profit. We all win.

GOLDSTEIN: This was just the way things were, and almost everybody accepted it, everybody except this one religious group, the Quakers. Robert Phillips, the consultant we talked about the Coke thing, he said the Quakers did this really fringy, radical thing.

PHILLIPS: They would have a fixed price. The Quaker would - the merchant would say what the price is, and that price would be the same for everybody.

GOLDSTEIN: That's it. Having one price for each item, that was the Quakers' radical thing. They thought haggling was just fundamentally unfair. They thought charging different people different prices for the same thing was morally wrong.

JIANG: You can imagine walking into a store and pointing to a dozen eggs and getting all fired up to do an egg haggle.

GOLDSTEIN: Let's go. Let's do this.

JIANG: And then your friend, like, kind of elbows you and says, no, no, this is a Quaker store.

GOLDSTEIN: No haggling. No haggling here.

JIANG: What are you doing?

GOLDSTEIN: Yeah, the Quakers were definitely, definitely in a real minority with this no-haggle thing.

JIANG: But as the modern economy got going in the 1800s and businesses starting getting bigger and bigger, haggle worlds got to be a hassle.

GOLDSTEIN: You know, if you are running a store, if you're working at a store, you need to know a lot to haggle. You need to know how much you paid for the stuff, how much your competitors are selling it for. You need to know how much different customers are willing to pay. Robert Phillips says you couldn't just hire some kid on summer vacation to come and sell stuff at your store.

PHILLIPS: Clerks usually had long apprenticeships before they could actually be allowed behind the counter. So they had to spend a couple of years learning the business.

GOLDSTEIN: Years?

PHILLIPS: Yeah, typically. Learning how to haggle before you would let them be left alone.

JIANG: Haggling is a pain for customers, too. Imagine you're at some store and there are five people in front of you in line. And you have to wait for them to all go through that haggling process before you can buy your shirts or whatever.

GOLDSTEIN: So finally around 1870, a few people decided to take a big risk. They decided to break with haggle world. They invented the price tag, this actual piece of paper stuck on each thing that tells you the price - not some starting offer subject to negotiation, but the price. And inventing the price tag was not just about fairness or what was morally right; it was about building really big stores.

PHILLIPS: Two stores here in New York, Macy's. And Macy was a Quaker. And he featured fixed prices. The most famous one was Wanamaker's in Philadelphia.

JIANG: Wanamaker and Macy's, they're building these new things, these department stores. And they're trying to hire all of these clerks, but they don't want to train them for years and have them become master hagglers. So the price tag solves this problem. It makes it easy for them to hire the clerks.

PHILLIPS: All they had to do was be essentially what clerks are today, you know, knowledgeable about the fabric. Oh, madam, this would look wonderful on you. They didn't have to do pricing. They didn't have to haggle. They didn't have to know the cost of items.

JIANG: Wanamaker becomes this kind of evangelist for the price tag. He says, look, the price tag, it means you, the customer, you don't have to arm wrestle with the clerk anymore when you buy things.

PHILLIPS: There's no longer a war between the seller and the buyer, which is what he called the higgling and the haggling. Everyone can come into Wanamaker's and know they will be treated the same.

JIANG: Customers loved it. The price tag spread. It was everywhere.