Thursday, January 15, 2015

NYC electronics store earns gelt with Orthodox business model 

B&H is not a shop for idle browsing.

An arterial network of bin-stacked conveyor belts line the ceilings, shuttling merchandise between departments, dumbwaiters transport orders from the basement straight to cash registers for customer pick-up, and lines rope off every step of the shopping experience.

The specialty photo/video superstore's huge selection, low prices, and efficiency of its brick and mortar design is unique, particularly for a non-chain entity. Founded in 1973 and now located in midtown Manhattan, B&H is a Mecca for industry professionals and electronics enthusiasts alike, long billing itself as "The Professional's Source."

The building takes up an entire city block on 9th Avenue between 33rd and 34th Streets — not a strip of real estate with heavy foot traffic — and yet, the store is consistently packed with customers.

"It's always busy," one cashier tells me at three o'clock on a Wednesday. "Sunday is definitely the busiest. We've got to make up for Saturday."

B&H is closed on Saturdays. B&H is also closed after 1pm on Fridays, and on all major Jewish holidays, including, but not limited to, Passover, Sukkot, and Shavuot. B&H is owned and operated by Orthodox Satmar Jews, and religious observance is one of the company's key defining characteristics.

"Before I went to B&H for the first time, I was told two things," says Zack Akers, a New York-based filmmaker. "It's the only place to go in the city if you're serious about yourself in this business, and it's run by Hasidic Jews."

So, how does that religious identity impact B&H's business philosophy?

Rabbi Daniel Lapin is an Orthodox rabbinic scholar, economist, and author of "Thou Shall Prosper: Ten Commandments for Making Money" and "Business Secrets from the Bible: Spiritual Success Strategies for Financial Abundance." He sees B&H's dual commitment to religious observance and profitability in the private sector as tandem services to God, where earning power yields both opportunity for charity in the literal sense, and proliferation of goods and services in the broad.

"Even though I'm in business, I'm not in business to make money," explains Lapin. "I'm in business to serve God's other children. The money flows as a consequence." It's impossible, says Lapin, to strip money matters from spiritual life, because the two are so intertwined.

A disproportionate number of B&H's salespeople are also Orthodox Jews, assuming varying degrees of observance clear by their dress. Many have forelocks and tzittzit (ritual fringe) — and speak Yiddish/Hebrew/English hybrids among themselves — while the religious apparel of others is confined to yarmulkes.

There are fewer places in the city outside the Satmar sect of Williamsburg where you'll encounter so many Orthodox Jews, an insular community known to keep largely to itself.

The clientele, on the other hand, is predominantly secular.

No to mark-ups and yes to expert guidance
Commercial editor Alison Grasso cites the knowledgeable staff as B&H's biggest selling point.

"They really have to know what they're talking about," she says. "They also tend to have the best prices, even compared to online sites like Amazon."

It's rare in a competitive market for a non-franchised store to both refuse mark-ups and provide expert guidance, says economist and MIT Sloan School of Management Professor Ezra Zuckerman Sivan. "If they can pull that off, that's a pretty compelling value proposition."

Absolutely zero B&H business is conducted on Jewish holy days
The trade-off, from a consumer's angle, is that B&H is closed for one and a half days every week. Sure, this limitation can be easily remembered, but B&H also closes for Jewish holidays that might not necessarily be on a non-Jew or secular Jew's radar, including a whole week for Passover in the spring, and a week for Sukkot in the fall.

Perhaps more atypical — particularly in the always open age of the Internet — is that the company's online store also shuts down every time the 9th Avenue store closes for religious reasons. Absolutely zero B&H business is conducted on Jewish holy days.

Does this put B&H at a competitive disadvantage?

"People can just adjust," says Zuckerman Sivan, explaining that the situation might be different if B&H were just emerging in the marketplace now. "At this point, they've got a pretty strong reputation" — both in terms of that value proposition of competitive prices plus specialist attention, and in terms of synonymy with religious observance.

"I always check the website first because [I know] they're often closed," says Grasso, adding that B&H's limited weekend hours are not ideal, but she plans her visits accordingly. Holiday hours are listed on B&H's website year round.

Because many products offered at B&H are big-ticket investments like cameras, and hard to find specialty items like photographic paper, consumer trips to B&H are, most likely, not spontaneous.

"These are not time-sensitive purchases," or everyday necessities requiring immediacy, says UCLA Anderson School of Management Professor of Marketing Andres Terech. "Most of us are willing to wait another day to buy the ideal camera that we want to buy."

Orthodox values versus modern egalitarianism
The restricted hours mean increased crowds, a huge stressor for customers, but that congestion — which, Grasso says, can "make for an unpleasant experience" — might also yield an unanticipated benefit for the company.

"People pay a lot more attention to a restaurant that's filled with people," says Zuckerman Sivan. "That kind of set up could make it seem like there's even more buzz, and even more demand than there otherwise would be."

And, there could be an element of value added in who operates this business. "There's nothing kosher about a camera that you can actually say you need to buy in a kosher market," says Terech, who himself is an Orthodox Jew. "But there's community value," he adds, even beyond the Hasidic population.

'I think most Americans have a lot of respect for people who show clear commitment to their religion'
"I think most Americans have a lot of respect for people who show clear commitment to their religion, and are actually willing to accept limitations on their business or professional lives," agrees Zuckerman Sivan, who in addition to his post at MIT is the lay president of Young Israel of Brookline, an Orthodox congregation in New England.

Neither Zuckerman Sivan nor Terech are affiliated with B&H; rather, they speak to their personal experiences and belief systems. So too does Rabbi Lapin.

"I do believe that the spiritual reputation of B&H helps them more than being closed for one seventh of the week hurts them," says Lapin. "Part of it is the integrity spills over."

The integrity of the store, however, is a problematic issue. B&H has been sued multiple times for racial and gender discrimination. In 2007, B&H agreed to pay $4.3 million to settle a case levied by Hispanic employees over uneven pay scale; in 2009, four female employees sued B&H over failure to promote women to sales positions; and in 2011 Hispanic employees Luis Santana and Carlos Marchand sued B&H over denied promotions and raises.

On a recent trip to B&H, the salespeople — designated by their green vests — appear near evenly split between observant Jews and non-Jews. Nearly all are male and only two women are seen in green vests during 45 minutes wandering the store. The few blue-vested managers spotted are grey-haired, Orthodox men. Cashiers and greeters wear red vests. Every red vest is worn by a woman.

'Where in the Torah does it say that you have to pay all employees the same rate? Where in the Torah is equality depicted as a virtue?'
Lapin maintains that none of the aforementioned allegations undermine B&H's integrity. "Where in the Torah does it say that you have to pay all employees the same rate? Where in the Torah is equality depicted as a virtue? The answer is nowhere at all." The company's business model, according to Lapin, adheres to God's plan insofar as it's described in, "His book."

"The notion that there's a moral flaw in people who, because they don't pay all their employees the same — I'm not sure I see the basis for that in morality. It may not be fair, it may not be legal, those are not my areas. But to say that there is a clash with Jewish values simply would not be true," said Lapin.

B&H's business operations team is notoriously private. While representatives have agreed to interviews in the past, director of corporate communications Henry Posner declined participation for this story, citing current company policy to cooperate only with "publications like Popular Photography or Shutterbug who speak directly to our current and potential customers specifically about the products we sell."

However, we can glean from past — albeit rare — communication with the public regarding religious issues that the letter of Jewish law reigns supreme, just as Lapin describes. Posner wrote in a 1999 iteration of "F1RST LOOK," B&H's email newsletter, "We do NOT close as a matter of convenience, nor do we do so out of whimsey. [sic] […] The same requirements dictate that not only must the observant temporarily abjure commerce, but that their enterprises and business activities do likewise. It's not possible, under the ethics which guide our owners, simply to leave non-observant employees at work."

Because B&H is a closely held, private corporation, there is no way to know its gross figures, or whether or not its closures throughout the year negatively affect its sales profits. Likewise, it is impossible to know if the series of lawsuits have made a noticeable dent in attracting new customers, or if the limited business hours present any financial hardship for its employees. The paper trail on B&H's legal issues ends in 2011.

Experts, not salesmen
But perhaps the most surprising revelation, even beyond the theoretical justifications behind the troubling lawsuits, lies in B&H's customer service.

I admit: I fully expected something of a hard-sell experience. However, I feel zero pressure to buy during my time wandering the store. One salesman notices me comparing two sets of headphones, and tells me flat out, "You don't need to spend more money for good quality." Another suggests, "Don't worry about the things you want. Just worry about what you need."

Buy from us or don't buy from us, seems to be B&H's MO. It's no skin off the company's back
A very jolly, Hasidic version of Santa Claus prints out the information on a backpack I'm considering. I overhear another salesman tell a customer interested in scanners that he may be better off purchasing directly from the manufacturer, and still another encourage a married couple to take photos of the printers in contention, and discuss the options at home.

Maybe this is the real secret to B&H's success: upfront honesty. B&H wants your business, but it won't hustle you into a purchase.

How many times can you say you visited a store where the salespeople appeared nonplussed about making a sale? Where you are encouraged to focus on needs, eschewing frivolous indulgences?

Buy from us or don't buy from us, seems to be B&H's MO. It's no skin off the company's back.

B&H's owners, coming from an insular community uninterested in melding with mainstream culture, put a great swath of employees at a severe disadvantage. They also, surprisingly, deliver an unparalleled consumer experience.

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