Prime Day is mostly a good deal for Amazon, not you


I used to be a sucker for sales.

I don’t get excited about events such as Amazon Prime Day, which is happening this week. Since 2015, this global sale extravaganza has given Prime members “exclusive” access to “epic savings.”

Let me be clear: I look for bargains, and I use coupons. But the retail marketing strategy around sales lost its luster after I read “Dollars and Sense: How We Misthink Money and How to Spend Smarter” by Dan Ariely and Jeff Kreisler, who contend that the thrill of bargain shopping often causes consumers to act irrationally.

GET CAUGHT UP

Stories to keep you informed

Stay with me on this, because you need to recognize what’s happening to your brain when you’re tempted by those little red boxes highlighting the savings: 38 percent off a Fitbit! 45 percent off an electric toothbrush! 55 percent off a Samsonite luggage set!

It’s not just Amazon. Following its lead, Target, Walmart and other retailers have their own summer sale events. (Amazon founder Jeff Bezos owns The Washington Post.)

The deals are designed to appeal to your hunter instinct.

But chasing sales this way is folly. As “Dollars and Sense” explains, bargains make us feel smart, as though we’re finding value where others haven’t. Discounts “dumb down our decision-making process.”

Over the years, I’ve interviewed “Dollars and Sense” co-author Kreisler and other financial experts about how consumers can train their brains to focus less on their perceived savings. Here are six tips to spend more consciously.

Change your shopping dialogue

No, you won’t “save” any money. You’ll just spend less on an item you may or may not actually need.

If not for Prime Day, would you be searching on the site for a new vacuum or for an upgrade to your wireless headphones?

Keep this in mind: You never save when you spend.

Ignore the “regular” price

There’s a psychology of pricing that retailers use to get you to feel that you’re getting a great deal.

Here’s an example from “Dollars and Sense”:

Which would you be more inclined to purchase: a shirt with a $60 price tag or the same shirt with a sign that says it is regularly priced at $100 but with a 40 percent discount?

Either way, it’s the same $60 shirt.

Let’s try the same example from a different perspective.

You need to remind yourself that when you buy something that used to be $100 but is advertised as 40 percent off, you’re not saving $40; you’re spending $60.

“On a more rational level, we shouldn’t measure the value of what we are not spending — the $40 — but rather the $60 we are,” Ariely and Kreisler point out.

The sales won’t stop

Retailers love promoting sale deadlines. They want to convey a sense of urgency: If you don’t act now, you will miss out.

For this year’s event, Amazon said Prime members were able to “request an invitation to access invite-only deals — exclusive Prime Day deals expected to sell out.”

There’s always going to be another sale.

“When an item is ‘on sale,’ we act more quickly and with even less thought than if the product cost the same but is marked at a regular price,” Ariely and Kreisler write.

Watch out for cross-selling

Amazon is so good at pitching “products related to this item.”

They are just being helpful by showing you “Buy it with” and then listing other items you can bundle with your purchase.

Aren’t they thoughtful?

Before you know it, you’ve been shopping online for an hour, dropping more stuff in your cart.

Every dollar spent today is lost for later

The intoxication of a sale is temporary.

There’s a term in economics called “opportunity cost.” This refers to a benefit you may miss out on when making a particular decision.

“Opportunity costs are what we should think about as we make financial decisions,” Ariely and Kreisler write. “We should consider the alternatives we are giving up by choosing to spend money now. But we don’t think about opportunity costs enough, or even at all. That’s our biggest money mistake.”

Ask yourself: Is your bargain shopping necessary?

To combat the pull of the present, consider what you could do with the money in six months or two years. Could you get a little more use out of your old vacuum so that you can build up your emergency fund? Do you really need another set of guest bath towels?

Curb your enthusiasm

Who doesn’t want to brag about a discount?

Knowing this, retailers point out how much you’ve saved.

“Way to go,” a message might say. “You’re saving $169.03!”

And, appealing to your inner penny-pincher, they add: “You’ve unlocked free shipping!”

That will do it. Ka-ching!

Retailers understand consumers are more likely to buy if they feel they are getting a price break. But in reality, true savings means not spending.

If you want more personal finance advice that’s timeless, order your copy of Michelle Singletary’s Money Milestones.

Leave a Reply

Your email address will not be published. Required fields are marked *