Shoppers should proceed with caution this holiday season.
Retailers have some tricks up their sleeves to entice consumers into spending more, including free shipping offers and too-good-to-be-true financing.
Consumers will have plenty of opportunities to see these tactics in action, because America has been very busy shopping. Cyber Monday alone generated $7.9 billion in sales this year, a more than 20% increase from last year, making it the biggest U.S. online shopping day in history. Shopping during Black Friday was also estimated to be at record levels this year, with $6.2 billion in online sales that day.
Retailers have long used various strategies to sway shoppers. One classic ploy is to price everything one cent short of a whole number, as in selling a product for $19.99 instead of $20. Another is to make bargain hunting into a game (where shoppers have to dig around to find what someone else may have missed). Stores also display a lot of low-priced “impulse buy” items, like candles and magazines, near the cashier line, so it’s easy for a shopper to pop something into his cart on the way out the door.
There are a few new tricks to be aware of this holiday season:
Know when ‘free shipping’ isn’t really free
More and more retailers are offering free shipping in direct response to both Amazon AMZN, -0.81% and Target TGT, -0.05% offering free shipping on all purchases, regardless of the amount this holiday season. Consumers really value free shipping — nine out of 10 people say it’s the No. 1 reason they shop online more often, according to the Walker Sands Future of Retail report.
But free shipping can come at a cost. Some retailers require shoppers to spend minimum purchase amounts before offering free shipping, and consumers tend to add more to their cart to get to that limit, said consumer-savings expert Andrea Woroch. In fact, some shoppers would rather spend $25 or $30 more on an item they don’t need than pay the $7 or $8 for shipping, she said.
Another factor to keep in mind: How long will the free shipping take? While Amazon is known for free two-day shipping for members of its Prime program (which costs $119 per year), the free shipping it’s offering to all shoppers for the holiday season will deliver items within five to eight business days, according to the Amazon website.
Read the fine print on 0% financing offers
If that no-interest offer sounds too good to be true, there’s a good chance it is. In an effort to convince customers to make larger purchases, many retailers will advertise so-called 0% interest financing offers.
In reality, many of these financing plans are actually deferred-interest financing. That means if a consumer pays off the total balance during a set introductory period, often 90 days, they won’t owe any interest – but if they fail to do so, they will owe interest not only on the remaining balance but on any portion of the original balance they’ve already paid off. These offers are meant to resemble the 0% interest cards offer by credit-card issuers, which generally are truly interest free.
Consumers may be better off skipping any form of credit from retailers entirely. Another common bonus retailers offer this time of year is a one-time discount if a consumer signs up for the store credit card. However, these credit cards have some of the highest interest rates out there, meaning that consumers who don’t pay their balance in full each month could end up owing more in interest than the discount they received at sign-up.
Beware the pop-up shop
The spotlight is no longer on Santa Claus and his elves at the mall.
Shopping centers work with their retailers to host pop-up shops and events that complement their businesses, said Miro Copic, a marketing professor at San Diego State University. Doing so brings customers to the area, where they’ll typically wander around and go shopping. “It draws a whole variety of people who wouldn’t normally come to a mall,” he said.
Some online retailers set up these mini-stores in malls to give customers the chance to get up close and personal with their merchandise. There’s a reason for that: shoppers are typically affected by the products they touch, a study published in Applied Cognitive Psychology found. A shopper is more likely to buy a product if he touches it, the researchers found.
Don’t assume that the ‘original’ price is accurate
Getting 50% off the list price sure does sound good. But that list price may have never existed in the first place.
That’s especially true of products sold at discount and outlet stores, according to a recent study from Donald Ngwe, an assistant professor at Harvard Business School. He examined the prevalence of fake “discounts” and their influence on shoppers’ behavior.
Often, products sold at discount and outlet stores were never intended to be sold at regular retailers. Consequently, the “original” price listed on the tag may never have been the price the product was meant to be sold at. Not only do these list prices make sales appear more attractive, but Ngwe found that they can also make consumers think that a product is higher quality.
Consumers would be wise to track the prices of items they wish to buy to understand exactly how good of a deal they will be getting. They can do this by visiting the same brick-and-mortar store regularly or by using online price comparison tools such as Camelcamelcamel and The Tracktor.
Don’t fall for FOMO — fear of missing out
Watch out for retailers hosting numerous flash sales, or extending their sales (as seen after Cyber Monday this year). “They’re doing more and more to create that sense of urgency, and people have a fear of missing out,” Woroch said. Some companies are offering daily deals this holiday season, while others are simply stretching the length of their sales — or offering similar new ones immediately after one sale ends. Shoppers can protect themselves from overshopping by unsubscribing to newsletters or opening a separate email account just for messages from retailers, Woroch said.
At some point though, if you’ve been eyeing an item or you need to get a specific gift and you see it’s part of a sale, go for it, she said.
One reason to take the plunge: retailers aren’t offering the same big discounts in the days leading up to Christmas that they used to, Copic said. Tariffs on Chinese goods and materials may affect holiday shopping. Companies that need to restock products, such as handbags and golf clubs, might price these items higher because of the tariffs on exports, he said. Typically, stores save some last minute deals for the 10 days before the holidays — some of the biggest days for holiday shopping are between Dec. 15 and Dec. 24, he said — but that may not happen this year. “You won’t see better deals, and if you see good deals now, you may as well get them,” he said.
A version of this article was previously published on MarketWatchby