How to become a savvy shopper

Singapore consumers, whether they shop online or in stores, often consider themselves savvy shoppers who can find a great deal. 

In reality, however, companies use a multitude of tactics to nudge them to spend more. 

Clever consumers can make smarter choices by understanding how these nudges work and taking steps to avoid being pushed. 

NUDGING CONSUMERS

The story of how retailers learnt to nudge consumers to buy more began decades ago, with research by experts such as University of Chicago Professor Richard Thaler. 

Whereas traditional economics theory assumes that people optimise their purchases, Prof Thaler found that actual buying behaviour is not quite so rational. 

People may pay too much for their clothes, for example, or buy items on sale that they do not really need. 

Prof Thaler was one of the early adherents of behavioural economics, which focuses on how people actually make economic decisions.

Fast forward to today and retailers are also using behavioural economics research to influence shoppers. 

Prof Thaler found, for instance, that consumers are willing to pay more if the price looks better. 

Consumers prefer to buy a dress that is marked down from $140 to $70, for example, rather than one that costs $60. 

“We feel great when we get something that is marked down in price, when the reality is a bit of manipulation from a marketer creating an artificial reference point,” said Prof Thaler. 

Another tactic retailers use is limiting the number of choices. Psychologist Sheena Iyengar used a study that showed only 40 per cent of shoppers stopped to browse when six varieties of jam were available, compared with 60 per cent when 24 varieties were on offer. 

Almost half the shoppers made a purchase when given just six varieties, however, compared with only 2 per cent of shoppers who had 24 options. Online and offline retailers may limit shoppers’ number of choices, then, so they are more likely to buy.  

Some retailers also “frame” prices so that consumers buy more expensive merchandise. 

In one classic study, explains University of Pennsylvania senior lecturer Gizem Saka, shoppers who were given a choice of two bread makers, one for S$80 and one for S$120, often bought the cheaper one. To increase sales, the company added a “platinum” model for S$475. 

Even though the S$475 version was irrelevant, it led to more consumers choosing the middle ground and buying the $120 bread maker.

According to author William Poundstone, multiple studies have shown that prices ending in “9”, such as $49 or $1.49, boosted sales by 24 per cent. Consumers who are aware that retailers frame prices and use “9” can look for the best deal rather than being influenced subconsciously. 

When products are complex, said Prof Thaler, consumers find it difficult to select one that suits them best. 

They will choose a mobile phone plan based on information from one provider, for example, or take the first offer they are given for a mortgage, even though shopping around could save them thousands of dollars. 

“Companies thus have real incentives to invest time, energy, and talent in competing through obfuscation,” said Prof Thaler, “by hiding product characteristics in the plain sight of fine print.” 

For shoppers who go to physical stores, the layout and staffing matter as well. When shoppers enter a store, they most often walk around its perimeter, found consultancy KPMG Nunwood. Retailers make sure they position key products along the sides of the store so more people see and buy them. 

SMART SHOPPING

While these are just some of the many tactics that retailers use to encourage shoppers to buy more, they demonstrate how retailers can nudge shoppers to increase their spending. So, what is a shopper to do? 

The best place to start is by understanding how retailers influence your behaviour and asking yourself what you really want to buy, rather than what the retailers prefer to sell you. 

If you realise that the lowest-priced item is perfectly fine, the items retailers want to sell are on the sides of the store, items on sale may not be the best deal, and checking multiple stores can give better choices at better prices, you are on your way to becoming a smarter shopper. 

Then write a list and buy only what you need rather than being tempted by deals you will regret in the longer term. 

Short-term bargain-hunting can prioritise saving money over longer-term value, according to The Atlantic senior editor Derek Thompson, so spending wisely on a few items on your list can help you avoid unwise spending on cheaper or on-sale items that cause longer-term regret.  

The secret to being a truly savvy shopper, then, is not just looking for what seems to be a low price. Instead, it requires planning your shopping carefully and avoiding “nudges” that push you towards what retailers want to sell rather than what you need.