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Saturday, January 13, 2007

Crazy Eddie's "Culture of Deceit"

This is a comment left in response to the post Crazy Eddie's Low-Price Guarantee highlighting a column by Hal Varian:

Professor Hal R. Varian:

My name is Sam E. Antar and as Eddie Antar’s cousin and CFO of Crazy Eddie I helped mastermind one of the largest securities frauds of the 1980’s. Much attention has been paid to Crazy Eddie’s famous price policy – “Shop around. Get the best prices you can find. Then go to Crazy Eddie's and he'll beat it!” Even more attention has been paid to its legendary commercials featuring Jerry Carroll.

However, many people do not know the real story behind Crazy Eddie’s aggressive sales tactics. Yes, we “offered” the best price and at times it was sometimes true. However, most customers never purchased the items that they initially came into Crazy Eddie to buy. We had an entire procedure built around Crazy Eddie lingo code words described below to maximize profits for the company.

We had in Crazy Eddie lingo called an “SW” or “switch the customer” policy which was to initially seek to sway the customer to purchase a more profitable item that offered “better value.”

If the initial sales person could not SW the customer he would “TO” the customer to let another more experienced sales person “take over” the sales pitch with the customer in order to “guide” them to the more profitable purchase.

If the customer was still insistent on buying the items that they had originally come into Crazy Eddie to purchase rather than lose the sale we would sell them the merchandise but try to sell them high profit accessories and long term warranty contracts to make up for the low profit of the units purchased.

If the merchandise was not in stock we would sneak the display item off the shelf and “lunch it” or repackage it and sell it as brand new.

Finally, if a customer decided not to purchase a product for any reason after going through various phases of this process Crazy Eddie has a “NAD” or “nail at door” policy where a sales person located at the exit would try to “kosher” the customer.

The Crazy Eddie Empire was built on deceit. The massive financial fraud that followed was based on a culture of deceit the permeated from the Antar family that ruled Crazy Eddie.

There are many lessons to be learned from the Crazy Eddie frauds. Specifically as it relates to your commentary I would suggest something I learned in my first day in economics class, “There Ain't No Such Thing As A Free Lunch.”

Company’s have costs and must earn a profit. Yes, some companies can make money more efficiently than others. However, as a former criminal I can assert that old line, “If it looks too good to be true, it is probably is.”

Respectfully,

Sam E. Antar (former Crazy Eddie CFO & ex-felon)
http://www.whitecollarfraud.com/

    Posted by on Saturday, January 13, 2007 at 07:09 AM in Economics, Market Failure | Permalink  TrackBack (1)  Comments (13)

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    This is a fascinating discussion about low price guarantees - the sort of conversation between professional economists and criminals that you would have never seen... [Read More]

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