In idle moments, many of us ponder what one thing we would take to a desert island, which deceased person we'd like to have dinner with, what the world would be like if everybody just got along or what our last meal would be. But perhaps more of us imagine where we'd work, even in miserable conditions, merely to get the employee discount.
If you've never worked retail, employee discounts have nibbled at your consciousness for decades. You've sneaked looks at the sales receipts of customers who are retail worker bees. Or you've actually considered canceling a vacation at Thanksgiving knowing that, as a holiday hire at the local furniture mega-store, you instead would be heating up a frozen turkey dinner in the company lunchroom, but -- wait -- it would mean saving $300 on a new couch!
Employee discounts certainly are not new, but they surfaced in the public consciousness early this month when General Motors announced that every Tom, Dick and Harriet in America who buys a GM car until July 4 will get the same discount as employees. (The company typically gives workers a 3 to 4 percent cut below dealer cost, which in some cases could mean a $10,000 savings, according to the Associated Press.)
The GM deal makes everyone a member of a club that is entitled to spend less money than nonmembers. Yes, it's a marketing gimmick, a form of one running rampant these days. Think Costco, Sam's Club, grocery store discount cards, anyone -- which is everyone -- who gets a Bed, Bath & Beyond coupon in the mail every other day.
The size of employee discounts ranges anywhere from a reported 10 percent at Target stores to 30 percent off bee pollen, fish oil capsules and everything else at General Nutrition Centers. Most companies tout the fact that they give employee discounts and advertise them in want ads. But when asked what they are, companies clam up. (This, despite the fact that people routinely brag about how much of a deal they get from their employers.) A Gap representative declined to reveal the size of employee discounts at Gap, and its Old Navy and Banana Republic stores, but the company once confirmed to CNN/Money that it ranges from 30 to 50 percent.
A friend who works for Hecht's department store said employees may use one of the never-ending newspaper 15 percent off coupons on top of a 30 percent employee discount. He said the coupon discount goes on the sales slip, and then when the Hecht's charge card bill comes, the employee discount is lopped off that total. Considering that so much of Hecht's stock is on sale to begin with, it is conceivable that you could purchase a spiffy summer suit with pocket change.
Obviously one reason to offer employee discounts is to pump a chunk of the company's payroll back into its coffers. Daniel Butler, vice president of merchandising and retail operations for the National Retail Federation, said the discounts have existed for a long time, but what has changed is a willingness to offer them to part-time employees.
"Twenty-five years ago in retail, a typical store would be made up of 60 percent full-time employees and 40 percent part-time. Over the last 10 years especially, with the growth of night and weekend business," the numbers have flipped, Butler said. To fill out their part-time needs, companies use the discounts to attract students and people with other occupations (artists, for example) that may not pay a steady wage.
Paul E. Oyer, associate professor of economics at the Stanford University School of Business, suspects that employee discounts have become a standard part of retailing recruitment and employee retention for several other reasons.
The first has to do with taxes. For most people working in retail, this isn't a big issue. But if you were in the 50 percent tax bracket and your store gave you a big employee discount and lowered your wages somewhat, you then would be taking compensation in merchandise rather than taxable income, Oyer explained. He noted that universities and hotels do much the same thing, offering discounted tuition or rooms to family members.
Another reason for offering employee discounts as incentives to prospective employees is what Oyer calls "sorting."
By advertising employee discounts, stores draw potential workers who want that discount because they know and like the merchandise and want to buy it with the discount. Oyer said a connection probably could be made between an eagerness for the discount and the potential productivity of the person -- "if being good at your job means being enthusiastic."
Would it ever be a good idea to eliminate an employee discount? Oyer said it depends. If a retailer needs to cut costs, it is difficult to cut people's wages or benefits. But workers might prefer a cut in the discount rather than a loss of actual cash, he said. When times are tough, attracting the right type of person is much less of an issue. More people are looking for jobs, so employers get their pick of people anyway, Oyer said.
For many people who have moved on from retail sales to government or corporate work, the employee discounts of their youth bring back fond memories.
When Cate Hammaker, now an auditor with Pension Benefit Guaranty Corp., was fresh out of college, she had few appropriate work clothes. She took a part-time job at Ann Taylor because it carried the type of clothing she wanted to wear. Her sister, Mary Jane Jamar, now a vice president of the World Wildlife Fund, chose to go retail, too, but preferred the style of Garfinckel's. Their mother yearns for the days of Hammaker's second time in the retail world.
In 1990, Hammaker worked at an Australian company that made brightly colored, expensive high-thread-count linens.
"I worked there after my car died and I needed extra money to buy a new one, since my [real] job at that time was way out in Fairfax. At Christmas I bought my entire family sheet sets and comforter covers with the 25 percent discount. My mother still has the bedspread and pillow shams I purchased for her and my father on their bed," Hammaker said.
For others, the employee discount allows intimate contact with, and ownership of, high-end goods.
Wendy Silverman worked full time at Saks Fifth Avenue in the early 1990s among "rich girls" who, she said, worked only to get employee discounts to buy designer clothes and Gucci handbags. Silverman is now a PTA mom, works for an interior design company (where she gets furniture wholesale) and is a fashionista in her North Bethesda neighborhood. She said her customary 30 percent employee discount at Saks was nothing compared with the savings during a time of the year when an additional 20 percent would be lopped off. At that time, Silverman honed her taste for $1,000 purses that would cost employees "only" $500.
"The employee discount there was an amazing thing. I would love to go back there," Silverman said wistfully.
Then again, maybe not. Silverman concedes that she often went home with a paycheck in the negative, a result of her purchases being subtracted from her wages.