How Stores Make You Spend More During Holidays
The holidays are here. It’s the most expensive time of the year for most of us, and after we’ve bought gifts for kids, family members, friends, white elephant exchanges, New Year celebrations, and even schoolteachers, we’re left with a crater-sized hole in our savings (or a massive credit card bill). You may think this is just because it’s the season of buying, but retailers make it even harder on our wallets by employing a cavalcade of tricks and techniques to get you spending with abandon. Here are the ten biggest weapons in their arsenal.
1. Using Deceptive Sale and Clearance Pricing
This time of year is tough on our wallets. The retailers know it, and they want to take advantage of our bargain-hunting sensibilities. After all, when you’re buying gifts by the cartload, money is on the top of your mind. So when you see a sweater for $19.99, with “was $39.99” above it, you think “great, what a deal.” Only it’s not! Our brains are wired to enjoy getting something for nothing, or way less than 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 we don't see it as a deal.
Recently, 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. So don't assume the before and after prices are real. Chances are, that sweater has been $19.99 all year.
2. The Store Layout Is Designed to Maximize Profit
Retailers have spent 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, you can bet that the products placed at eye level on the shelves are 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 of us are right-handed (over 88 percent) and thus will reach for things with our right hands. So you’ll see eye-catching displays to the right of the store entrance, offering high-margin products, or items they want to get rid of quickly.
If you want to avoid falling into either of these traps, go against the flow. Veer left, and look to the top and bottom of the shelves. You’ll find better deals there.
3. Almost Every Item Ends With a 9... for a Very Good Reason
The difference between $199.99 and $200 is not just one cent. It’s a psychological trick that somehow makes the first price WAY more attractive than the second. Psychologists believe that as consumers, we pay much more attention to the dollars than the cents.
And specifically, the first digit in the price. We look at the 1 and think “oh good, we’re still under $200.” Well, yes: By a penny. But the second it jumps into the $200 category, it’s between $200 and $300. That’s a significant jump in our heads, even though on paper it’s only a jump of one cent. Strangely, it works even when the price is raised to end in a nine. This test revealed that when a store raised the price of a dress from $34 to $39, sales of the item went up by one-third! So look carefully at the prices, and mentally note your $199.99 purchases as over $200.
They will be after tax, anyway (except in a few states).
4. Your Senses Are Used Against You
Around this time of year, you are going to be overloaded with holiday smells, sights, and sounds that get you into the festive spirit. This is not simply a way to indicate that it’s the most wonderful time of the year. This actually gets you in the mood to spend more! You feel more at home in the store if you’re listening to holiday music, smelling cinnamon and apple pie, and seeing bright reds, greens, and other cheerful colors. When you are more relaxed and at ease, you are more likely to take your time.
And the longer you’re in the store, the more time you have to browse and buy.
Interestingly, retailers also use this technique when they want you out 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.
5. Specially-Packaged Gift Sets and Bundles Cost You More
The stores love 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.
But there’s a catch: You’ll discover that you are not getting value for your money. The bundled items and gift sets are usually more expensive than buying the items individually. Plus, the packages are bulked up to make them appear like they contain more than they actually do (the selection boxes offered in the UK are a prime example of this), and you are purchasing space and filler that looks impressive. Don’t get these gift sets unless you are sure you’re getting a deal.
6. Placing Lower-Priced Merchandise Next to Expensive Items
This is a classic move by the retailer to get you to compare and contrast something that looks similar but is in fact very different at the core. For instance, you may see two TVs next to each other. Both 60”, both “smart,” and both offering HD. However, one is $1000 more than the other one. It’s a no-brainer.
Well, look again. Maybe the higher priced TV is from a manufacturer known for better design and quality. Or perhaps the HD on one TV is 720p, vs 4K on the expensive one. The stores are actually charging more for the cheaper TV than you'd see in other places, but by putting it next to a similar, higher-priced model, it looks like a steal.
7. Offering Double-Up Deals That You Don’t Need
Call it BOGO, or Two-For-Less, or whatever else you like, but the main driver of this is a false economy. You see a great pair of jeans at $35. But if you buy a second pair, the price is $50. Hey, that means you get a second pair for only $15, or both pairs equal only $25. Deal!
But did you actually need two pairs of jeans? Or did you just buy the second pair to assure yourself you were getting a deal? And did you check other stores to see if those same jeans were being offered at $25 a pair elsewhere? Either way, be wary of the double deals. They get you spending more than you need to.
8. Providing Easy Credit Options: Buy Now, Pay Later!
Retailers know many Americans are feeling the pinch a little more these days. But they don’t want that little fact to get in the way of their profit margins. They know you may not have the money to pay for something now, but they're 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. The big one: If you don’t pay off that card in the interest-free period, all the interest you would have accrued on it is now added on. Many people get stuck in the credit card trap around this time of year. If you really want something, consider layaway, or finding a way to pay. But don’t slap everything on a credit card or use the store credit option if you're not sure you can pay. Sooner or later, the debt comes due.
9. Real Clearance Items Will Be Harder to Find
Most stores, especially big retailers like 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 shopping: Why give you the chance to save money on merchandise when they know you’ll pay full price anyway? That’s not to say you won’t be able to snag bargains… But you will have to do a bit more digging to find them.
10. They Make You Remember the Good Old Days
Most of us remember the good times around the holidays and put the not-so-good times out of our minds. Sure, there were those fights our parents had or the tantrums we threw because the right toy was not purchased. But overall, we tend to look back in fondness on the holiday season. It’s a time of cheer, love, and giving.
Stores tap into that. They go very heavy on classic films and songs. They will bring our 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.
Now, don’t let any of this put you off the holiday shopping season. Stores are not inherently evil, or up to no good. They are simply taking advantage of techniques that are known to increase sales, and keep their own employees in work. 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.