A growing body of research shows that the best way to make your loved ones happy is giving them real-life experiences, not things.
Scrambling frantically to buy meaningful gifts for Christmas or Hanukah? Well, you can relax (a little). Pleasing those near and dear to you this holiday season need not involve any last-minute shopping mall runs or late-night web crawls.
All you need is a reasonable sense of what your intended gift recipients like (or might like) to do with their time. That’s because, according to a growing body of social science research, the best way to increase the enjoyment, satisfaction and general happiness of your loved ones (not to mention office mates) is to give them real-life experiences.
What does that mean, exactly? Well, depending on the gift-receiver in question, it could mean almost any kind of in-person activity, adventure, or escapade, from concert tickets to restaurant meals, from guitar or cooking lessons to museum or amusement park passes, from rafting trips to factory tours to island getaways. “The happiness we get from our experiences give us more enduring pleasure,” says Cornell psychology professor Tom Gilovich, who since 2003 has been exploring the distinction between material and experiential purchases.
Now, in a new paper, “A Wonderful Life: Experiential Consumption and the Pursuit of Happiness,” Gilovich and colleagues Amit Kumar and Lily Jampol review the considerable research into this intriguing subject over the past decade. And because few folks have the leisure to pore over academic studies any time of year—let alone while racing to cross names off holiday gift lists—I’ll summarize Gilovich & Co.’s findings. (Think of it as Money.com’s gift to you!)
Here, then, are just a handful of the many reasons why experiences provide greater satisfaction and happiness than material goods:
1) Experiences are more social. In other words, we are more likely to connect with people when we’re actually doing something, rather than simply owning something. And humans, being highly social creatures, are generally happier when connecting with other humans. To be sure, some material gifts—video game consoles, for example, or sports equipment—can effectively be owned privately and contribute to public engagement at the same time, but for the most part having something is a solitary experience. Doing something is generally not.
2) Experiences remain special for longer. Humans are prone to habituation, which is one reason why people who suffer great tragedies wind up happier than they predict they will be soon after the loss occurs. We get used to things, which is good when it comes to negative events. But the flip side of this tendency is that it applies to positive events as well. That’s especially true with material goods. As we get used to the things we own they provide us with less joy and satisfaction. As Gilovich explains: “When faced with a decision of a new sofa or taking a trip somewhere, people often say to themselves, ‘I better buy the sofa because at least I’ll always have it. But the trip will come and go before I know it.’ The material possession, in other words, seems like a better investment. But when it comes to increasing our happiness and sense of well-being, research suggests just the opposite. We quickly adapt to the new sofa, but the pleasure we get from our experiences live on in the stories we tell and the memories we cherish.”
3) Experiences are unique. The down side of being social is that we routinely compare ourselves to others — the proverbial keeping up with the Joneses. One reason experiences remain special in our memories long after they have occurred—and therefore continue to make us happy—is because they are generally not diminished by the experiences of others. You might own a fancier smartphone than I do, which detracts from the enjoyment I derive from mine; but the trip I took to New Hampshire was unique because that adventure involved me! You may have stayed in a four-star hotel, but you didn’t enjoy the quaintness of my three-star inn.
4) Experiences help us define who we are. “We are what we do, not what we have,” write Gilovich, Kumar and Jampol. And what they mean is this: While it’s true that certain material goods—a parent’s ring, a rare watch—contribute to our sense of identity, most people craft their psychological identity from their exploits and actions, not their possessions. In one study, for example, Gilovich found that people feel more similar to someone who makes the same experiential purchase than they do to someone who makes the same material purchase. In another study, participants listed the five most significant material purchases of their lives and the five most important experiential ones. They were then asked to summarize their “life story,” using one or more of their purchases in the narrative. Result: People were twice as likely to mention experiences than possessions.
This last point is especially interesting to consider when buying gifts for children. You are more likely to affect the future happiness of a child—who she becomes and how she sees herself—with positive experiences than with expensive toys.
Even better, you’ll save time and money this year by not having to wrap so many presents. A gift certificate fits quite nicely in an envelope.
Google, Amazon, and Apple are all pushing new tools—and often, encroaching on the turf of competitors—with the hopes of snagging a larger cut of everyday consumer purchases.
Several of the world’s tech giants are squaring off, thanks to new strategies and tools that have one common goal: to bring their respective companies a bigger slice of the enormous consumer spending pie.
Google vs. Amazon
This week the Wall Street Journal reported that Google is working on a “Buy” button that would allow online shoppers to make quick one-click purchases—a feature that’s most often associated with Amazon, the world’s largest e-retailer. Google wouldn’t run factories full of merchandise, nor would it sell and ship goods like Amazon does. Instead, in theory (none of this is settled, or even confirmed by Google), consumers would be able to buy goods in a single click directly from partner retailers that show up in Google Shopping search results. Google is reportedly also considering an expedited shipping subscription service along the lines of Amazon Prime or ShopRunner, which would store the customer’s billing info and shipping address.
Google dominates search in general. Yet when people are searching specifically for things to buy, far more start their online shopping expeditions at Amazon. Naturally, Google would love to have more consumers browsing for goods with its search tools. What’s more, it would love to keep them within the Google sphere when actually making purchases. Right now, consumers who start shopping searches at Google are typically sent to other sites—including Amazon—when the time comes to buy. Google would much rather keep a tight hold of the eyeballs and wallets of shoppers.
Amazon vs. Ebay
Amazon recently announced the introduction of a new “Make an Offer” feature that allows customers to bid and negotiate on the price of certain merchandise—options that are in the wheelhouse of eBay, which was born as an auction site and has evolved into more of a general marketplace for sellers big and small.
For now at least, Amazon is essentially just the host site for sellers who are willing to haggle with customers. Only items falling under a few sales categories, including Fine Art and Sport and Entertainment Collectibles, are available on the “Make an Offer” basis, and it’s always a third-party vendor (not Amazon) that does all the negotiating and selling. After a customer views the suggested price of an item and makes an offer, “The seller will receive the customer’s lower price offer through email, at which point the seller can accept, reject or counter the offer,” an Amazon.com press release explained. “The seller and customer can continue to negotiate through email until the negotiation is complete.”
Consumer Reports noted of Amazon’s new tool, “By adding a haggling element to its traditional fixed-price model, Amazon broadens its appeal to a wider audience of consumers motivated not simply by low prices, but by the thrill of the hunt and scoring a deal.” Note that there are no open auctions, and that all haggling takes place privately between the two parties involved—not unlike the negotiations that take place between buyer and seller in a car dealership, or perhaps via a connection made on Craigslist or Priceline. Customers can “Make an Offer” on roughly 150,000 items right now at Amazon, and the e-retail giant plans on expanding the bidding option to hundreds of thousands more items in 2015.
Apple Pay vs. All Other Forms of Payment
When Apple Pay debuted in October, the mobile payment tool—allowing customers to pay for goods with a tap of an iPhone—could be used at Macy’s, McDonald’s, Whole Foods, and several other major chains, but overall less than 3% of U.S. merchants that take credit cards were ready to accept Apple Pay. As the New York Times reported this week, however, dozens more banks, retailers, and at least one NBA Arena (Amway Center in Orlando) have since started accepting Apple Pay, and experts increasingly are of the mind that Apple has the best chances of making smartphone payments commonplace:
“Retailers and payment companies see Apple Pay as the implementation that has the best chance at mass consumer adoption, which has eluded prior attempts,” said Patrick Moorhead, president of Moor Insights & Strategy, a research firm. “They believe it will solve many of the problems they had before with electronic payments.”
Still, there’s a very long way to go before a critical mass of consumers are paying for purchases regularly with iPhones, or any smartphones. Many big-name retailers, including Best Buy, Walmart, and Gap, aren’t accepting Apple Pay because they’re trying to create their own smartphone payment system—which may or may not be easier and more convenient to use than Apple Pay. More importantly, consumers generally still see old-fashioned debit and credit cards as a more convenient and certainly a more comfortable way to pay for stuff. For smartphone payments to be a true success, Apple Pay or other services will have to convince the masses otherwise.
Smartphones, TVs, mattresses all got snapped up for pennies (pence, to be precise), thanks to an automated service gone haywire.
Shops are saving all your details so they can sell you even more.
Retailers want to get to know you. This should come as no surprise — we’ve all seen how our Internet search history and purchases affect the online ads we see — but it’s just as important for bricks-and-mortar stores to understand their customers.
It’s all about marketing. Whether you like it or not, retailers want you to see sales, deals and new products you’ll be interested in, and the only way they’ll know your preferences is by tracking them.
“In newspapers, we would throw out these blanket ads, and there was so much waste,” said Ritchie Sayner, referencing pre-Internet marking strategies. He has worked for RMSA Retail Solutions, a retail consulting firm, for 35 years and has seen firsthand how direct marketing campaigns have evolved.
Most people know that retailers want their contact information — handing over your name, email address, ZIP code and phone number has become a somewhat standard element of the modern in-store transaction. It’s better than nothing, but a name and email address isn’t much of a customer profile. That’s the bare minimum. If they’re doing it right, a retailer is not only going to know your name and where you live, they’re going to keep track of how much money you spend, your favorite brands, your shoe size and pretty much anything else they can think of. Here’s what they use it for.
1. Clearing Out Inventory
Say you own a shoe store. You’re going through your inventory, and you notice you have three times as many women’s shoes in size seven than in any other size. Where are all the size seven customers? How can you get them to come into your store and solve your superfluous seven problem?
Simple: Send them an email. From boutiques to big-box stores, retailers are doing their best to build robust customer profiles so they can reach a specific group of shoppers when necessary. Sure, you could send an email to all the women on your mailing list, promoting a big weekend shoe sale, but the size nine ladies won’t be too pleased when they show up and all the great shoes are only available in sevens.
“They’re going to keep track of you by ‘She’s a size four, she buys this particular line,’” Sayner said. “If you buy on sale or if you buy at full price — they have more information about you than you’d probably like them to.”
2. Making You Feel Loved
Happy birthday! Enjoy a free cup of coffee. It’s your anniversary? Here’s a coupon for two meals at the price of one! Remember that time you bought something from us last year? It’s that time of year again! Here’s 30% off for nothing in particular — we miss you!
You may not love the idea of a company keeping a ton of information on you, but man, you love getting free stuff on your birthday. It’s like that free birthday cookie makes up for the hundreds of emails that business sends you every other day of the year. Retailers want details on who you are so they can appropriately reward you with freebies and discounts, in exchange for your loyalty.
3. Classifying You
It can be very difficult for a salesperson to get you to share your information — just think of how many times you’ve declined to give the cashier your email address when checking out.
“It’s really hard to do,” said Jason Becker, chief operating officer at RICS Software, a point-of-sale platform. “If you’re going to ask for a customer’s information, you have to give a good reason for why.”
That requires establishing a relationship. The salesperson has to treat you well and earn your trust. At the end, he or she can use your interaction to fill out a customer profile.
It’s funny, because for all the people skills it may require to develop the profile, the way it’s used is quite robotic. You’re no longer Jane who likes running, you’re a 35-year-old female marathoner who spends $300 on athletic gear every three months and replaces her running shoes every February.
“Most softwares also enable the retailer to classify that customer into a cohort, classify that type of runner into what type of runner or athlete that person is,” Becker said, speaking in general about POS systems. “It enables them (retailers) to market more effectively.”
A lot of that information is populated through loyalty programs or entered manually by the sales person, especially if you’re in a smaller store. Larger retailers may generate a customer profile with the information it captures when you swipe a credit card. It happens in many ways, through software of various sophistication levels, but you can confidently assume the stores you frequent have a sort of dossier on you.
For many consumers, that dossier is terrifying because of the slew of retail data breaches that happened in 2014. After having their credit cards compromised, their email addresses stolen and even their passwords cracked, it can be hard to trust a retailer, but it all comes down to what you’re comfortable giving up for a deal.
More from Credit.com
This article originally appeared on Credit.com.
Luxury brands are using their higher prices tag to trick your wallet and your mind.
Is it better to buy a Rolex than a Timex? What about buying a $50 bottle of wine instead of “two-buck Chuck”? They may be worse for your wallet, but buying these luxury items may actually mean you get more enjoyment from the product. (See also: 10 Little Words That Will Get You the Best Price Every Time)
Consider these five reasons the value of luxury is all in your head.
1. Your Brain Is Successfully Tricking You
For over 60 years marketers have recognized that the value of luxury is all in our heads. A 1949 article noted a study where sales of women’s pantyhose increased drastically when the retailer raised the price from $1.00 to $1.14, all because the higher price “suggested higher value.”
So why is this the case? It turns out that increasing the price of the product actually changes the brain. According to this study, when a product’s price goes up, it increases “blood-oxygen-level-dependent activity in medial orbitofrontal cortex, an area that is widely thought to encode for experienced pleasantness during experiential tasks.” So by purchasing a more expensive product, your brain physically changes and tells you that the product is better.
2. More Expensive Wine Tastes Better
Researchers did a study about wine and found that more expensive wine tastes better. Subjects in the study tasted five different wines and were told they were being asked to rate the wine. The price of the wine was used to label the wine (instead of using A, B, C, D, E, for example). However, unbeknownst to the subjects, there were only three different wines, and two of them were tasted twice with one identified at a high price and one at a low price. For example, wine #2 was given to the same person, but it was labeled as both $90, its retail price, and as $10. What happened? The tasters rated the wine with the higher price as significantly better than the same wine priced cheaper.
3. A More Expensive Buffet Tastes Better Than a Cheap Buffet
In a recent study researchers examined what happened when about 140 diners ate at an Italian all-you-can-eat restaurant but paid different prices. The diners were charged either $4 or $8 for the lunch buffet of pizza, salad, breadsticks. They were then asked to rate how much they liked their food after they were done. After finishing, the diners rated their experience and people who paid the $8 price rated the buffet as being 11% better than those who paid just $4. And the amount people paid for the buffet didn’t affect how much they ate.
4. We Have a “You Get What You Pay for” Mentality
How many times have you heard the phrase, “you get what you pay for?” You’ve probably even said this to yourself on occasions when you’ve purchased a cheaper option and had it break on you. Perhaps you bought a $1 flashlight instead of the $15 Maglite at the $1 flashlight broke on its first use? Or you went with the $2,000 company to paint your house instead of the $7,000 company and they missed part of the trim or didn’t reinstall the gutters properly.
In these cases you probably told yourself “you got what you paid for.” But you are far less likely to notice when the cheaper option works just as well. What’s the problem with this? By ignoring all of the times when things go right (and the cheaper option works just as expected) and only noticing when things go wrong (that is, when the cheaper option breaks), you are cementing the idea into your brain that luxury priced items are better.
5. Even McDonalds Tastes Better With Different Presentation
Two Dutch pranksters went to a food show, cut up McDonald’s food to make it look fancy, called it “organic,” and what was the result? Instead of realizing the food was McDonald’s (and not something these foodies attending the show normally ate), they rated the the food “fresh,” “rich,” and “delicious.” Their perception that the food was extra high quality was based on looks rather the actual quality of the product.
So what is the takeaway from all of this research? If luxury is all (or mostly) in your head, is that a bad thing or a good thing? If you’re actually getting more enjoyment from something that you pay more for, this seems fair. But, is it wrong to charge more for the same product just so consumers value it more?
Read more articles from Wise Bread:
My One Favorite Frugal Living Tip
10 Little Words That Will Get You the Best Price, Every Time
30 Free Ways to Cheer Yourself Up
Amazon is losing its edge as the lowest-cost retailer.
This is shaping up to be the year all the rules of shopping were broken. First came the bombshell revelation from NerdWallet showing that Black Friday goods may not be quite the deals retailers claim, as many were selling year-old items at the same prices as last year’s Black Friday. And if the newest report from ShopSavvy is correct, the decade-long maxim that Amazon.com AMAZON.COM INC. AMZN -1.21% has the lowest prices could be wrong as well.
For those unaware of the company, ShopSavvy’s purpose is to help would-be shoppers find the best deal on products by providing retailer information through its website and its barcode-scanning mobile app on Android and iOS. And if its recent ShopSavvy Showdown (say that three times fast) is correct, both Amazon and Best Buy BEST BUY BBY 1.46% offer higher prices on overlapping items than the undisputed King of Retail: Wal-Mart WAL-MART STORES INC. WMT 0.16% .
The survey says …
This survey is not the first showing that Amazon is losing its edge as the lowest-cost retailer. Earlier this year, a report from Wells Fargo and online price-tracking company 360pi found Amazon had higher prices overall when compared to Wal-Mart and Target in four critical areas: shoes, electronics, housewares, and health products. However, the report found that Amazon typically offered the lowest prices when it came to “like-to-like” items. Essentially, when a specific item was on both sites Amazon still had the lowest price.
However, this newest data finds the exact opposite. The survey, based only on the same products for sale at Walmart, Amazon, and Best Buy, finds that “Wal-Mart has the cheaper option on over 50% more products than Amazon and Best Buy across the categories analyzed.” In addition, the survey notes Wal-Mart’s online price match policy, in which the company specifically agrees to match prices from Amazon and Best Buy.
So I should go to Wal-Mart right now, right?
If these results are correct, you should go directly to Wal-Mart and not worry about shopping around online, right? Well, not so fast. As the survey clearly shows, Wal-Mart didn’t always have the lowest price, although it was a good bet they did. In addition, the survey didn’t go into a lot of detail about the product selection. Without that critical piece of information, it’s hard to know whether these goods are representative of a true head-to-head comparison or whether these items are merely a good selection for Wal-Mart.
In addition, the data presentation concerns me. Although there were three retailers chosen for the survey, the data was only presented as Wal-Mart versus Amazon and Wal-Mart versus Best Buy. Without the third head-to-head comparison, Amazon versus Best Buy, the survey can come across as less of an unbiased comparison and more of a pro-Wal-Mart piece.
Finally, competition between megaretailers is rather intense. In many cases, retailers consider prices of 3%-5% lower as being worthy of running commercials specifically outlining these differences. The closest ShopSavvy comparison between Wal-Mart and the other retailers was in the TV category, with Wal-Mart being “only” 15% cheaper than Best Buy on average. When matched up against Amazon in the Kids category, ShopSavvy reports that Wal-Mart is a massive 45% cheaper on average.
Overall, this doesn’t mean that ShopSavvy’s data is wrong, but this should be considered only one data point in your holiday deal-hunting comparison. One shopping rule that will never be broken is to continue to shop around for the best deal; you’ll be thankful you do.
The case for not wasting time in search of the perfect presents for your loved ones.
Let’s just say it: Gift cards are the best present for almost everyone on your list.
“Gift cards?!” you yell, monocle falling into your tea. “Who, other than your distant relations, would be so tacky? So gauche?”
The answer? Most people. According to BankRate, 84% of Americans have received a gift card and 72% have given one. By the end of 2014, $124 billion dollars will have been loaded onto gift cards, and sales have been growing for years.
The case against gift cards is weak. (Though my colleague, Kara Brandeisky, begs to differ.) A recent Wall Street Journal article revealed that “only” 37% of consumers want a gift card this season, yet spun this news as a negative: “The novelty of gift cards has worn off,” Alison Paul, Deloitte’s vice chairman and retail sector leader, told the paper.
Really? Does more than a third of America wanting your product mean the “novelty has worn off?” If only we could all be that unsuccessful.
And the truth is, most of us will be unsuccessful when we shop for gifts this year. A 2014 survey from online retailer Rakuten showed almost three out of four Americans won’t like the gifts they receive this season. Let’s do some quick Moneyball here: Based on these two studies, most gifts have a 25% approval rating, while gift cards have a 37% approval rating. Gee, I wonder which one I should pick…
Faced with those statistics, the case against gift cards boils down to human insecurity. How will your friends know you really care about them if you don’t give them something special? It’s this fear that drives people to spend an average of 14 hours shopping for gifts. That’s more than half a day of your life spent stressing out, and for what?
“I got you a Star Wars ice cube tray because I know you like Star Wars (just like everyone else on the planet). I’m a real friend.”
Please. Does this type of vague, commercial knowledge of the people close to you—the type of knowledge that leads to thousands of tacky Han-Solo-in-Carbonite iPhone cases being given every year—actually demonstrate anything other than the commodification of companionship?
Gift cards, therefore, aren’t just the right gift for your friends, they’re the right gift for society. They cast aside our anxieties and pretensions to declare, “I’m so confident in our relationship that I have nothing to prove.” That’s therapeutic for everyone. In contrast, the stress of trying to accurately translate our feelings into an object—something that’s neither possible nor desirable—can actually be dangerous.
For proof, look no further than The Gift of the Maji, a classic O. Henry story in which two lovers set out to buy each other gifts. Despite their poverty, the wife scrapes together $20 to buy her husband a chain for his only possession: an old pocket watch. In order to pay for it, she sells her beautiful long hair. But the husband trades his watch to buy his wife ornamental hair combs, leaving them both with nothing of value.
There are a lot of lessons here, like don’t ever buy someone a hair comb, but let me get to the most important one: Wouldn’t they both have been happier with BestBuy gift cards?
Instead of getting caught up the need to be thoughtful, to the point where both parties sold their most treasured possessions for pretty mediocre presents, they could have spent their gift cards together and gotten a sweet flat screen. Maybe pop in Love Actually and talk about how their relationship is even more enduring than Hugh Grant’s aw-shucks routine. Now that’s what I call a Christmas.
What were we talking about? Oh right, gift cards. The point is that you’re statistically likely to buy an unwanted, meaningless present, so don’t get gray hairs over choosing the right one. Instead of stressing out, just put 25 bucks onto a piece of plastic and spend another 10 minutes writing a nice card. That’s almost guaranteed to go over better than anything else you could give.
Why not just give everyone cash, you may ask? Dude, that’s so tacky!
COUNTERPOINT: Why Gift Cards Are a Crime Against Christmas
The act of gift-giving is an act of affection. Show a little effort.
Whether you celebrate Christmas, Chanukkah, Kwanzaa, or all or none of the above, the holidays are always about one thing: showing your family and friends how much you care.
That’s why the average person spends 14 hours shopping for gifts for their loved ones. That’s why kids scrape together $400 to fly across the country to spend Christmas Eve with their cousins in Cincinnati. That’s why husbands watch Love Actually.
The holidays are a time to say to your family and friends, “Although you drive me crazy all year round, my life would be empty without you.” But that’s weird, so you buy your mom a stupid embroidered pillow that says it for you.
Gift cards, on the other hand, aren’t about any of that. Gift cards are about efficiency. Gift cards are about corporate profit. Gift cards degrade the entire exercise of gifting. (Unless you are my colleague Jake Davidson, whose impassioned defense of this deplorable practice you can read here.)
A gift card says, “I couldn’t be bothered to think of you this holiday season; help yourself to exactly $25 worth of crap from Target.”
Gift cards are a crime against Christmas.
Let’s start with the basic etiquette problem. The first rule of gift giving is, don’t say how much you paid for your gift. Simple. So why get a gift receipt for one person, then hand the next person a gift card emblazoned with the exact amount of money you spent? You’ve just put a definitive monetary value on your relationship. When did we decide this was an acceptable social practice?
I know, I know—it’s hard to find thoughtful gifts for everyone on your list. But don’t think your friend will do a better job. It’s even more difficult for people to give good gifts to themselves. Here’s why: Researchers have found that when people are given “play money” like gift cards, they’re more likely to spend it on stuff they don’t need. In fact, they’re more likely to overspend. CEB Towers found that 65% of gift card users spend 38% more than the value of the card.
Alternatively, your gift card may sit, unused, in your loved one’s wallet or junk drawer. Industry insiders call this “spillage,” and companies can count on American consumers to spill almost $1 billion in gift card balances this year. Believe it or not, that’s down 88% from what it used to be, before Congress passed the Card Act, which put limits on expiration dates and inactivity fees.
And what happens to the money on unwanted gift cards? Obviously the retailer profits, but the Wall Street Journal has also reported that states in dire financial straits have tried to seize the value of unused gift cards using statutes that allow states to collect “abandoned property.” (You can check your state’s laws here.) In other words, buy a Target gift card that your friend never uses, and you’ve essentially given a gift to Target and/or your governor.
The worst are the general-purpose cards that you can spend anywhere. First of all, why didn’t you just give cash? Second, these “gift cards” aren’t actually gift cards in a legal sense. They’re prepaid debit cards, and they’re not subject to the same consumer protections as either gift cards or real credit cards. That means general purpose cards can come loaded with activation fees, inactivity fees, and other fees that degrade the value of the card.
And finally, if you go through all the hassle of finding a personalized gift for your loved one and then he doesn’t like it—so what? The act of giving is an act of affection. It’s not meant to be an efficient way of allocating goods. The Three Wise Men gave baby Jesus gold, frankincense and myrrh. Did a new mother, her betrothed, and the infant Son of God really need aromatic resin as they were fleeing persecution? Probably not. But that’s why the Three Wise Men were wiser than you.
COUNTERPOINT: Why Gift Cards Are The Only Present That Makes Sense
Sale prices are faker than ever this holiday season, as retailers openly admit that no one buys items at the ridiculously inflated "regular" or "suggested" amounts listed on price tags.
When seemingly everything is always on sale, is anything really on sale?
That’s a question that any savvy, value-oriented shopper must ask from time to time—and especially during the annual holiday shopping season frenzy, when it’s routine to see entire stores discounted by 40% or 50%. When such markdowns are a dime a dozen, who is foolish enough to actually buy anything at full price?
The answer could very well be no one. Something called “price anchoring” is a widely employed tactic in the retail world. Basically, the concept involves the establishment of a high price anchor, which locks into place a perception of value. You’ve probably seen tens of thousands of these anchors, in the form of “list,” “regular,” “original,” “suggested,” or “compare to” amounts shown on retailer websites or price tags. Anchor prices are set intentionally high, not with the idea that consumers will actually pay the inflated prices, but so that the retailer can create the perception of a tremendous deal when the item is inevitably placed “on sale.”
For example, picture a sweater listed with an original price of $100. When it’s placed “on sale” for $50, that seems like quite a deal—a far, far better deal than if the original price were listed at $55 or $60. All along, however, the store selling these sweaters has been planning on getting around $50 apiece for them, and it would probably make a profit even if it sold them for $25 each—which the store surely will during after-Christmas sales.
There’s nothing new about price anchoring. What is new—and pretty darn galling among consumers who expect more pricing transparency—is that in today’s promotion-heavy retail world, “original” prices appear to be getting exponentially more inflated. What’s more, retailers aren’t even pretending that a single customer ever paid its “regular” or “original” prices for anything.
In a new New York Times column, Farhad Manjoo wades into this murky world, trying to figure out how shoppers can evaluate whether or not a deal is a deal when seemingly everything is presented as one. What he reports, among other things, is that this season in particular has seen an “explosion of less-than-stellar deals advertised on the web,” in which there’s really nothing special about all but a very few of the sale prices available on Black Friday and other supposedly amazing days for bargains.
While nearly all retailers engage in the practice of inflating list prices more or less with the sole purpose of making discounts seem more impressive, a Macy’s spokesperson openly admitted that it came up with its original prices “based on many different factors, including the cost of the item, overhead, benefits we offer … as well as our ability to offer the item at a lower price during sale events.” Macy’s also pointed out some fine print on its website alerting shoppers of the following:
“Regular” and “Original” prices are offering prices that may not have resulted in actual sales, and some “Original” prices may not have been in effect during the past 90 days.
Holiday season sales and discounts are presented as being very special, but in fact there’s often nothing special about them—because in all likelihood, the only purchases occur when these items are “on sale.” If a price exists that no one ever pays, it shouldn’t be referred to as a “regular” or “original” price. It could be described by another term: a fake price.
There was a lot of discussion about the topic of fake pricing back in early 2012, when J.C. Penney tried to shake up its business model, in which more than 99% of its sales were below list price, and items were routinely marked down by 50% or 60%. J.C. Penney’s attempt to get rid of such extreme discounting and offer fair prices from the get-go failed miserably, at least partly because shoppers are compelled to buy more when retailers use the ruse of inflated price anchoring. And now we’re left in a situation in which sales are ubiquitous, both sale and original prices are arguably more meaningless than ever, and it’s never been more difficult to tell when a deal is actually a deal.
To some extent, shoppers seem to be aware of all of this. Some of the reason that Black Friday purchases were down this year is that the majority of consumers felt that Black Friday sales are meaningless because they assumed—rightly so—that there would be “more sales throughout the holidays.”