LEXINGTON, Ky. (Nov. 24, 2020) — From large family gatherings to crowded store aisles, as the COVID-19 pandemic persists, Americans are rethinking their holiday traditions.
This time of year, the economy relies heavily on consumer spending. According to the National Retail Federation, holiday sales represent about 20% of annual U.S. retail sales.
But will the pandemic shrink budgets? And could it change how people shop for gifts?
Allan Chen, professor and Gatton Endowed Chair of the Department of Marketing in the Gatton College of Business and Economics at the University of Kentucky, conducts research in the area of behavioral decision theory (BDT) and pricing. His interests focus on examining consumer and managerial decision making.
To help buyers make the most of the holiday shopping season, UKNow enlisted Chen’s expertise. Find strategies to help you save in the Q&A below.
UKNow: Traditionally, Black Friday is the kickoff to the holiday shopping season. How will this year be different — considering many retailers are already offering discounts?
Chen: The pandemic is preventing people from lining up and getting into stores to grab deals quickly. But with so many of us stuck at home, the desire to shop has only increased. An extended timeframe for “deal-grabbing” will help both retailers and consumers. Instead of being a one-day event, Black Friday will turn into black week or black weeks.
UKNow: As the COVID-19 pandemic persists, are consumers more or less inclined to take advantage of holiday deals?
Chen: People are isolated, and many are feeling depressed during this challenging time. Therefore, this holiday season, shopping is even more effective as a way for consumers to “escape” reality. While those who unfortunately lost their jobs are hesitant to spend, there are necessary purchases almost everyone has to make during the holiday season — such as gifts for the immediate family. Those who were fortunate enough to keep their jobs may shop more to release the stress accumulated over the lockdown or to replace the “exhausted” household items that have been over-used.
UKNow: The COVID-19 pandemic has instilled new behaviors in shoppers — who are spending more time and money online — is this a trend that could become permanent?
Chen: Online shopping has become increasingly popular, even before the pandemic, and is now the default for almost everyone. Many (especially older) consumers were forced to go online during the initial lockdown. That experience has been mostly positive, or at least perceived to be so, as a result of consumers reducing their cognitive dissonance (“what else can I do?”). Online shopping is not only here to stay but will also bleed into all demographics.
UKNow: Will shipping be delayed this year due to high demand? If so, should shoppers plan ahead?
Chen: The Christmas lights are turned on earlier this year, even before Thanksgiving, as people celebrate the holidays at home. So the holiday shopping season is definitely starting earlier and that means, there is more demand. On top of that, with the disruptions in global supply chain, the inventory for popular items will be a challenge. It's important to plan early and plan well.
UKNow: Even if you have a set budget, it's difficult to pass up a "deal." What are some of the tactics retailers use that shoppers should be aware of?
Chen: Consumers often experience “shopping momentum.” Once you start shopping, you are ready to spend more. That’s when the retailers will get you. So, make sure your first purchase is well thought through (no matter whether it is big or small), before you go on a shopping spree.
UKNOW: It's easy to get caught up in the holiday spirit and overspend. Do you have any tips for staying within budget?
Chen: “Within” the budget is the key. I suggest following a two-step process:
- Set a budget that is as realistic and reasonable as possible.
- Set a lower budget by multiplying your original budget by a percentage (e.g., 80%).
If you worry you’ll outsmart yourself by gaming the system and setting a higher budget in the first place to off-set the budget cut in the second step, you can even break your budget into mini-budgets for various purchases.
To sweeten the deal, make sure you set up a mini budget for an “other” category as well. That way, as long as you don’t overspend in each specific category, you’ll have some extra money left over (for unexpected purchases, or start the new year with a small cash bonus to yourself).
UKNow: Especially on Black Friday and Cyber Monday, shoppers are under the impression they need to act fast to get the best deal. Are there benefits to sitting back and waiting — even during a "Flash Sale?"
Chen: With the extension of Black Friday into multiple days of deals, hopefully, the pressure you face from “flash sales” will be much less. But even before you feel the urge, set a mini budget for each category. Additionally, make a list of items you’ll have to buy for the holiday season and familiarize yourself with the regular prices. If you see them on sale, then go ahead and buy them! If you’re not sure about the prices, imagine whether you’ll really need the “hot” item or not — picturing where the purchase will end up sitting a couple of weeks/months from now will help you decide whether to click the purchase button. Also, remind yourself of the joy of waiting a bit longer and being a smart shopper.
UKNow: All of this being said, can Black Friday and Cyber Monday still be an effective way to save on holiday shopping this year?
Chen: Definitely, there are real deals on Black Friday and Cyber Monday. And a lot of the comparison-shopping websites can help you vet these. But you want to spend your hard-earned money on things you and your significant others will love and use, not something that will go into the attic/garage the next day.
UKNow: Is there anything else you would like to add?
Chen: Shopping can be fun, but don’t use shopping as a therapy. Engage your family in the shopping “trip,” and together you can enjoy being smart shoppers.
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