With the holidays upon us, I asked Kit Yarrow, professor of consumer psychology at Golden Gate University in San Francisco, to shed some light on why we tend to spend more than we should at this time of year. In fact, retailers usually rely on holiday spending for nearly half of their annual sales. Why are we so well behaved for the first nine months of the year just to blow it all in the last three? And how can I control my urge to buy everything in Crate & Barrel's holiday catalog? Yarrow had answers.
What is it about the holidays that seems to inspire people to spend more money?
It's not just gift-buying. People feel celebratory this time of year. They go out more, have more dinner parties, and want to buy outfits to wear to social events. There's a great desire to decorate the house and bring light into a darker time of year for us. What's different about this year?
This year, there isn't an income class that isn't affected by something. We have high-income consumers that are a little nervous about spending money because of volatility in the stock market. The middle class are freaked out about the value of their homes, and then the lower-income consumer is strongly affected by gas and energy costs. This is the first year since probably 2002 when everybody in some way is a little bit concerned. But I don't think it will be a horrible year. Retailers are really pulling out all the stops. They are kind of like desperate lovers courting the consumer. [They're using] promotions, sales, parties, and events. They're much more nervous than consumers are. They think consumers have a limited amount of money to spend, so they want to make sure they are spending it in their store.
That sounds like a good thing for shoppers.
This Christmas, consumers can get fabulous buys. Stores also have decreased inventories, so they won't have tons left for sales after Christmas. Consumers have made it clear that they are looking for bargains. It will be a very price-conscious holiday season. What about online shopping?
This year, online shopping is ubiquitous. In previous years, it was [either] a savvy group or those with Internet access [who utilized online shopping]. Now, anywhere between 70 and 80 percent of consumers are researching online. When you get numbers like that, it changes everything. There's no way retailers can't give consumers the best deal and hope to win. It makes pricing transparent. That's a big advantage to the consumer. Can you share some of your own holiday shopping secrets?
I use the computer all the time. Now that we can use the Internet, you can research when things are on sale. If you have a favorite store, then it makes sense to go there for the midnight madness sales. You can get things that are so cheap they are almost free. Retailers are losing money at those prices, but keep in mind, the reason is to get you in there so then you'll do more of your holiday shopping at a little bit of a higher price. Consumers should be aware not to get too wrapped up in the moment. What about timing? Is it better to buy early or late?
It depends on the exclusivity of the gift. If there's something that's special that [you] want somebody to have, you have to be careful. Retailers haven't ordered as much this year, so inventories won't be as high. I think the first or second time it goes on sale you should get it, because it won't be around if it's a great item. But if you don't have anything in mind, then right after Thanksgiving, on Black Friday, there are fantastic deals. I also have relationships with salespeople in stores. You can ask them to ring up what you want on a day it will go on sale. This probably wouldn't work at Wal-Mart, but [it does] at department stores. Retailers want those relationships as well. They want consumers to feel connected with them.
So do research beforehand. Make a list. It sounds so Santa Claus-ish, but it helps you get organized. The malls are incredibly fantastic, magical places if you're not stressed out. It's beautiful, it's convivial, it's fun. If consumers feel like they have shopping under control, then they can enjoy being part of the community.
Any other last-minute tips?
Don't go into debt to purchase holiday gifts. Ultimately, your loved ones would rather have a "happy you" than a new toy. Order gifts for out-of-towners online to save postage costs—70 percent of online retailers are planning free shipping promotions. And ask for gift receipts for all of your gift purchases, and tape them to the product or package right away. Keep your own receipts too—if something that you've purchased goes on sale, you can generally get a price adjustment up to two weeks after you bought it.