Stretching Your Dollar Series: What are some “traps” to avoid when shopping online
In today’s well-connected global economy, the latest gadgets, concert tickets, trendy designer wear, the best gaming chair, an epic holiday road trip in Europe, can be yours in just a few taps on your mobile phone.
As you scroll through Instagram, your feed bombards you with stunning images of people showing off their exclusive purchases and vogue experiences.
We are living in an era of FOMO, or the fear of missing out. It is like a powerful but invisible “force” compelling us to follow suit, avoid missing out and do whatever it takes to keep up with the digital Joneses (a word play on “keeping up with the Jones”, a popular English phrase referring to the comparison to one's neighbour as a benchmark for social class or the accumulation of material goods. ~Wikipedia).
Online retailers take advantage of FOMO by adding pressure techniques to make you complete the purchase. For example, you often see displays showing the number of items remaining or how many other buyers are interested in the same item. This creates a perception that stock is in limited supply, which causes you to start feeling anxious. You may become overwhelmed, and your decision-making ability is affected.
In this article, we'll explore three common traps to be aware of when you shop online and share some tips to help you shop savvier without burning too big a hole in your wallet.
1. A False Sense of Affordability.
Credit cards and Buy-Now Pay-Later (BNPL) services are widely accepted modes of payment at online marketplaces, and retailers make it very easy to make purchases using credit. They also offer the flexibility to break up a large payment into multiple smaller payments.
For example, you have a budget of $200 to buy swivel study/office chair for your desk. On the other hand, a high-end, ergonomically designed “gaming” chair that costs $600 might seem affordable if payments can be spread over three instalments of $200 a month. So, instead of buying a chair that costs $200, you may find yourself spending $600 instead.
It is certainly tempting to go for the more expensive item. The option to buy first and pay later in instalments make expensive items seem more affordable. It is important to remember that doing so don't actually make the purchases affordable - you will eventually have to pay the full amount, sometimes with interest.
We are not saying that BNPL services or instalment payment plans are bad. They can be useful financial tools and when used responsibly, help us manage our cashflow.
Stick to the principle of spending what you can comfortably afford. Buy on credit when you can stick to the payment schedule and pay in full.
2. Impulse Buying
With a false sense of affordability, people tend to buy on impulse. Online marketplaces are carefully designed to encourage spontaneous purchases.
You may find the following experiences familiar:
Upselling. When checking out an item, say, when buying a pair of leather shoes. A cleverly timed prompt will appear at just the right time to offer a relatively inexpensive product like a shoe polish brush. It is a small add-on, but one that is designed to make you second-guess your decision and think, "why not?".
Product suggestions. When shopping for a computer mouse, related products such as a desk chair, headphones and computer keyboard appear as suggestions to tempt you into adding more items into your shopping cart, beyond your original intended purchase.
Social proof. Online marketplaces often prominently display how many others had bought the product recently and show customer reviews, both good and bad, to influence your decision to buy.
Before hitting that "Add to Cart" button, pause and ask yourself if the purchase is really what you need, and it does not disrupt your progress towards attaining your financial goals. Remember, being financially prudent and being self-aware are your defences against the temptations and traps of online shopping.
3. “Over-shopping” to get Discounts.
Have you ever experienced the following situation: You selected a $50 bluetooth earpiece from an online store. At the checkout page, you message pops up with the message that shoppers enjoy 20% off their total bill when they spend at least $100. Excited by the potential savings, you proceed to select a few other items, say a electric mug warmer, mouse pad and battery pack to bring your total bill amount to $100.
You are now feeling happy that you’ve bought $100 worth of items at $80 – a savings of $20!
But take a pause here to reflect. To qualify for the 20% discount, you actually spent $30 more and ended up buying things that you may not really need.
Online marketplaces run regular sale events and offer lots of similar deals and promotions to entice the shopper to spending more.
Being a smart shopper means you can take advantage of discounts and enjoy savings while buying items that you want and without spending more than you planned to.
Shopping Online Smartly.
The internet has made shopping very easy. You can shop online anytime (online stores don't close) and anywhere (visit your favourite store where ever you are using your mobile phone). But online marketplaces also set “traps” to lure you into spending more.
Here are some tips and tricks to protect yourself from these traps when you next shop online:
> Create a shopping list. Before diving into online shopping, make a list of the items you truly need. Stick to it religiously to avoid adding unnecessary items to your cart.
> Pause and reflect. Ask yourself if you really need (or want) that item you are eyeing. Take the time to consider by leaving website or app and wait for a few days before deciding.
> Cut down direct email ads. Limit ads by unsubscribing from marketing emails (even from the brands or online shops that you like).
> Limit social media ads. Restrict tempting offers pushed to your social media feed by turning off interest-based advertising so that social media don't know your interests.
> Keep Your Payment Information Offline. Do not save your credit card details with the online store or shopping app. Make online shopping less convenient and keep your credit card information secure.
By following these tips, you can shop online smartly, avoid falling into the traps set by online marketplaces, and ultimately save both your money and your peace of mind.
Be aware, stay alert and shop happy!
Credit Counselling Singapore
Published 8 September 2023.