How Stores Make You Spend More During Holidays
For many people, the holidays are the most expensive time of the year. After they've bought gifts for kids, family members, friends, white elephant exchanges, New Year celebrations, and even schoolteachers, they're left with a crater-sized hole in their savings—or a massive credit card bill. You may think this is because it’s the season of buying, but retailers make it even harder on shoppers' wallets by employing a cavalcade of tricks and techniques to get them spending with abandon.
Using Deceptive Sale and Clearance Pricing
During the holidays, gift-giving can be tough on people's wallets. The retailers know it, and they want to take advantage of shoppers' bargain-hunting sensibilities. After all, when you’re buying gifts by the cartload, money is on the top of your mind. So while a sweater priced at $19.99 reads “was $39.99” above it seems like a great deal, it is not. Your brain is wired to enjoy getting something for nothing, or way less than what other people are paying. An identical sweater with a $19.99 tag that is not on sale won’t sell as well. It's the same sweater, at the same price, but it is not seen as a deal.
In 2016, stores including JC Penney, Kohl’s, Macy’s, and Sears were all sued over the deceptive practice of marking up the retail price of merchandise just to mark it down again. Therefore, don't assume the before-and-after prices are real. Chances are that sweater has been $19.99 all year.
Designing the Store Layout to Maximize Profit
Retailers spend millions of dollars researching and refining the layouts of their stores, all with the goal of getting the most profitable items in your shopping cart. For instance, the products placed at eye level on the shelves are likely those that give the highest profit margin to the store. By contrast, if you have to bend down or ask for assistance to reach a product, it's probably not as profitable.
Another strategy revolves around the fact that most people are right-handed (over 88%) and thus will reach for items with their right hand. Therefore, stores place eye-catching displays to the right of their entrance featuring high-margin products or items they want to get rid of quickly.
Avoid marketing ploys by being aware of where products are displayed. Veer left, and look to the top and bottom of the shelves where you'll find better deals.
Ending Almost Every Price With a 9
The difference between $199.99 and $200 is not just one cent. It’s a psychological trick that somehow makes the first price a lot more attractive than the second. Psychologists believe that, as consumers, people pay much more attention to the dollars than the cents.
Also, specifically, people tend to focus on the first digit in the price. If the digit is a 1, then it is seen as less than 2, even if the difference is one cent. However, the second it jumps into the $200 category, the price is viewed between $200 and $300. That appears to be a significant jump in price, even though on paper it’s only a one-cent increase. Therefore, look carefully at the prices, and mentally note your $199.99 purchase as over $200. It will be a higher price after tax, except in a few states.
Feeling in the Mood to Spend
During the holidays, you are going to be overloaded with the smells, sights, and sounds that get you into a festive spirit where you are in the mood to give gifts and, therefore, spend more. You feel at home in the store if you’re listening to holiday music, smelling cinnamon, and seeing bright red, green, and other cheerful colors. When you are relaxed and enjoying the store experience, you are more likely to take your time to browse and buy.
Interestingly, retailers also use this technique when they want you to depart quickly. For instance, when fast-food restaurants are experiencing a rush, they’ll switch up the festive music for something more aggressive and increase the volume. Don’t be fooled by the sensory overload. Make a list, get in, get out, and be on your way.
Specially Packaged Gift Sets and Bundles Cost More
The stores favor putting together special holiday gift sets and packages. They’ve done the hard work for you, and you can get a great present or a hamper of food items in one fell swoop.
Upon closer inspection, you may discover that you are not getting value for your money. The bundled items and gift sets are more expensive than buying the items individually. Plus, the packages are bulked up to make them appear larger with additional items. Therefore, don’t buy gift sets unless you are sure you’re getting a deal.
Placing Lower-Priced Merchandise Next to Expensive Items
This is a classic move by the retailer to get you to compare items that appear similar but are different. For instance, you may see two TVs next to each other. Both have the same features. However, one is $1,000 more than the other one.
Maybe the higher-priced TV is from a manufacturer known for better design and quality. Perhaps the HD on one TV is 720p versus 4K on the expensive one. The store is actually charging more for the less expensive TV than its competitors, but by putting it next to a similar, higher-priced model, it looks like a steal.
Offering Double-Up Deals That You Don’t Need
Whether it's "buy one, get one free" or something similar, the main driver of these deals is a false economy. You see a great pair of jeans at $35. Also, if you buy a second pair, the price is $50, meaning you get a second pair for only $15, or each pair costs only $25.
If this didn't appear to be an attractive deal, you likely would not have spent money on that second pair of jeans. In addition, other stores may be regularly selling those same jeans for $25. Therefore, be wary of double deals, as you may be spending more than you intended.
Providing Easy Credit Options
Retailers know that some people may not be able to pay for their purchases upon receipt, however, they make sure this doesn't affect their profit margins. Retailers are willing to offer you thousands of dollars in credit, spreading the payments over 18 months without any interest.
Of course, there’s usually a catch. If you don’t pay off that card in the interest-free period, all the interest you would have accrued is now added to the total. To avoid large credit card debt, consider a layaway plan or another way to pay.
Don’t charge everything to a credit card or use the store credit option if you're not sure you can pay. Sooner or later, the debt comes due.
Making Clearance Items Harder to Find
Most stores, especially large retailers such as Target and Walmart, have certain aisles and “endcaps” devoted to sale and clearance items. But when December rolls around, those clearance areas become harder to find. This is the season of giving when stores know that you will pay full price. That’s not to say you won’t be able to find a few bargains, however, you will have to do a bit more searching to find them.
Offering Customers Incentives to Buy
Retailers look for other ways to get shoppers to spend money. They may offer free gifts with certain purchases. For example, if you spend a certain amount of money at a makeup counter, the store will give you a free gift such as a cosmetic or grooming kit. Without the free offer, you would not have been as willing to spend that amount of money. Other incentives to spend money include offers of store coupons and discounts.
Beware of "flash" sales, that promise to slash prices for one day. This marketing ploy aims to lure in large numbers of customers to purchase items before prices increase. However, price reductions may occur repeatedly throughout the season.
Remembering the Good Old Days
Most people only remember the good times around the holidays. Overall, they tend to look back in fondness on the holiday season as a time of cheer, love, and giving.
Stores tap into that through messages of classic films and songs. They will display iconic images of Norman Rockwell Americana, and give you the feeling of belonging. When you’re nostalgic, you’re happy. And when you’re happy, you spend more.
The Bottom Line
Don’t let any of this put you off the holiday shopping season. Stores are not inherently evil. They are simply taking advantage of techniques that are known to increase sales, and keep their own staff employed. Just come armed with the knowledge to save you from these ingenious tricks, and you'll be able to enjoy the holidays without spending too much.