Sunday, November 28, 2010

Profitable but Unethical Business Practices

We’re often told that ethics is good for business. Companies that sell quality products and treat customers fairly thrive because of it, while unethical companies fail.

In some ways the internet has helped to promote ethical business behavior. In years past, if you were treated badly by a company you might fire off an angry letter, complain to family and friends, or report the problem to the Better Business Bureau. Now you can make your voice heard on the internet, where consumers interested in the same product or company can find out about your bad experience. Companies often take complaints on review sites very seriously, because a low rating for a product or seller can kill a business.

But now we get this story in the New York Times about a business owner who turns the ethical behavior formula on its head. The story is long but highly entertaining. I’ll give the short version. Vitaly Borker, from Brooklyn, runs an online business that sells fashionable eyeglasses. His customer service is abominable: he overcharges for the glasses (which he often buys on eBay), cheats his customers, and abuses and threatens the ones who complain. (The tales of abuse are quite awful.) And yet, somehow, he makes a profit.

Here’s how. You’d think that the internet complaints about his business practices would be damaging, but not so. (Warning: the complaints contain bad language--from the seller, not the customers!) They actually draw traffic to his website. Viewers drawn by the complaints don’t buy his products, of course; but the heavy traffic and internet references to his site pushes it high up the lists people see when they run Google searches for the glasses he sells. That’s the dream of every web entrepreneur. Guided by Google, unsuspecting customers visit his website and are impressed by his low prices. They buy, some of them complain, more traffic flows to the website, and it remains high on Google search lists.

In this way, Borker has run a profitable business. Fortunately, as the story reveals, his immoral behavior may be catching up with him. But who would have thought that offensive customer service could be a recipe for business success, even in the short term?

Update 12/07/10: Borker has been arrested--an encouraging development for business ethicists everywhere.
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