The dirty secret of Amazon Prime Day
There’s always buzz around Amazon’s Prime Day, the sale extravaganza for Prime members, people who pay the company an annual or monthly fee to be specially treated with more ways to spend.
You may even plan your day around snatching a sale item or two — or three. And coming soon will be similar promotions from Target, Walmart and other retailers. But keep this in mind about any sale: You never save when you spend.
A sale is just a retailer’s ploy to get you to think you’re saving money on your purchase. The offer of a discount makes people emotionally irrational, says Jeff Kreisler, the co-author of “Dollars and Sense: How We Misthink Money and How to Spend Smarter.”
“Our unconscious decision-making biases lead us to make poor spending choices, whether through intentional traps set by retailers or by our own volition,” Kreisler says. “We get excited by the cool, fun, uniquely satisfying emotional rewards of something like Prime Day and lose sight of our goals and budgets.”
And yes, I know you love the free shipping. I’m not trying to get in your way of Prime membership privileges. I just need you to weigh the real costs. (Jeff Bezos, the chief executive of Amazon, owns The Washington Post.)
“It’s always good to take advantage of opportunities to purchase goods and services at lower prices than usual,” says Ric Edelman, co-founder of Edelman Financial Engines. “But this assumes you were planning to make the purchase in the first place, and that the purchase is necessary and appropriate, given your personal finances and financial goals.”
The more you understand behavioral finance, the more money you’ll actually save and invest.
“If you pay $200 for clothing that usually costs $300, you’ll brag about saving $100 when in fact you spent $200,” Edelman points out. “Even supermarket coupons are a problem. No one who uses a save $1 off coupon actually saves a dollar.”
Retailers know manipulation works. “That’s why they often offer sales events,” Edelman says. “They know that total purchases will rise, often by people spending money they can’t afford on purchases they don’t need.”
The better behavior is to decide what purchases you need to make and how much money you can afford to spend. “If the purchases exceed your self-imposed budget, reduce your purchase list instead of increasing your budget,” he says. “Otherwise, you’ll become broke, and you’ll stay broke.”
Here are some tips from Kreisler on how to pull back when Amazon Prime deals seem too good to pass up.
• Ignore anything that highlights how much you’re saving. Forget about “original” or “suggested” prices. You need to keep telling yourself that when you buy something that used to be $100 but is advertised as 35% off, you’re not saving $35, you’re spending $65, Kreisler says.
• What would your future self say about the deal today? “Marketing campaigns get us to act emotionally, irrationally and impulsively by focusing on the temptations of the present or how good it would feel right now to save big, get a treat, or get some needed retail therapy,” Kreisler says. “To combat the enormous pull of the present, to get out of the hot state of the moment, think of your future self. What would you in six months or two years say about buying a flat-screen TV instead of saving that money for a potential second wave of COVID-19 lockdowns and layoffs?”
• Don’t fall for manufactured scarcity. Did you really need 200 rolls of toilet paper in March? Does the airline really only have three seats left at that price? Retailers like to pretend this is your last chance to get a bargain, but it’s not. There’s always another “sale.”
• Don’t be anchored to past purchases. Kreisler says just because Amazon or some other data-hoarding algorithm reminds you that you bought something before, don’t assume that was the right decision and automatically buy it again. Or, fall for the “related item suggestions” that become a rabbit hole of more stuff placed in your online shopping cart.
• Don’t follow the herd. Often when you don’t know if a buying decision is right, you look to what others are doing. Just because all of your friends are buying the latest thing — a new phone, a Nintendo Switch or the Echo Dot — doesn’t mean you have to buy it too.
These tips may not stop you from succumbing to the exhilaration of thinking that you got something for a “steal” during Amazon Prime Day. But going forward, try to curb your enthusiasm for discount deals because the reality is you’re not actually saving any money.