High spend retail: How online shops get you to spend more

It’s estimated that somewhere in the region of $5-6 trillion was spent online last year, with ecommerce continuing to build on its pandemic boost.

For retailers, that means there is a big prize to be won – but it’s an extremely competitive field.

As a result, businesses are constantly on the hunt for anything that helps them to pull in an extra few shoppers; or that gets existing customers to spend that little bit more.

A lot of the techniques they use aren’t even new, though. They’re often the same kinds of tactics that date back to the Mad Men era and Ernest Dichter, the father of 'motivational research’, which sought to blend psychology with marketing.

But, as old as the concepts may be, the technology that’s available today has made them far more powerful than ever before.

How?

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For a start you no longer have to go to a shop in order for them to start trying to influence you. An online retailer is always just a few clicks or taps away.

Now, they can grab your attention with a push notification, or a text or an email – so you don’t have to be walking by the window to be tempted.

And retailers no longer have to wait to see whether a promotion or a sales tactic is working. Real time sales data lets them see if a sales promotion or technique is translating into real sales, and if it’s not they can tweak things on the fly to make it more effective.

So what are the kind of tricks they tend to use?

Preying on our FOMO – the fear of missing out - is a big one.

We all have an innate anxiety about missing something. Some of that goes back to a kind-of caveman instinct that once kept our bellies full, and some of it relates to the social pressure we feel to keep up with our peers.

But retailers will play with that to encourage us to buy.

How they do that can take different shapes, too.

You might click on an item of clothing and see a bit of red text telling you there are only 2 left in your size. Or maybe you’re looking at a package holiday, and the page tells you there are 10 other people looking at the same thing right now.

Or maybe it’s just a time-limited offer – a product is offering 30% off, but only if you buy it in the next hour.

Whatever it is, though, it’s all designed to start a clock ticking in our heads, which pressures us into buying now – before we’ve had time to shop around for a better deal; or realise we don’t need the product at all.

And what’s really underhand about this is that, often times, the pressure is completely made up.

There can be cases where a retailer has a sophisticated system that can give you real time data about stock levels, or who else is viewing the deal.

But researchers have shown that, often times, there’s essentially a random number generator buried in the app or website code that’s just making up the figure altogether.

And those discount countdowns are often made up too – what’s meant to be a 24 hour sale can often take days to expire… and then it gets replaced by a new time-limited sale a week later.

That made-up discounted price is an old trick…

Yes – and there are rules that retailers are supposed to adhere to.

The Competition and Consumer Protection Commission says that the ‘before’ price has to have been in place for 30 days before the promotion starts. So you can’t just bump up the price for a day, and then cut it and claim it’s discounted.

But, of course, online retail is harder to regulate – and if you’re dealing with a shop that’s not based in Ireland, or even the EU, it’s going to be harder still to enforce those rules.

Another old trick is the impulse purchase – how is that used online?

You might think of the impulse purchase as the little items at the till in a shop – but online shopping means we’re being nudged to buy more pretty much at every stage.

Maybe the entire purchase is based on an impulse, because you got a notification to tell you a limited edition product had just gone on sale.

But even if you’ve gone looking for a product, and found what you wanted, you will often get offered impulse purchases based on what you’re buying.

Maybe it’s some accessories for an item of clothing, or an add-on of some kind for a device you’re buying.

And it’s not just clothing - you even see this when you’re ordering a takeaway. In most food delivery apps now, you get offered a few side dishes or extras that you might have "forgotten" to add to your order in the first place.

Is this a form of up-selling?

Yes – and it happens at every price-point.

We’re all familiar with the fast food chains offering a super-sized meal for a seemingly small, additional cost. But it’s often even easier to lure people into spending more on big ticket items.

That’s because the spend we have in mind is already a sunk cost and, if we’re spending a lot to begin with, it makes everything else seem small by comparison.

For example, you could decide to spend €1,000 on a new TV, but then you’re prompted to get a bigger and better model for €1,100.

You’re already spending a lot of money, so what’s another €100 for all those wonderful extras? Forgetting, of course, that €100 is not an insignificant sum, and you didn’t even want those extras to begin with.

Another really common upselling trick is the offer of free shipping if you spend X amount.

If you happen to go over that threshold that’s great – but if you don’t you suddenly feel compelled to buy extra items to get that "freebie".

That’s despite the fact that you may not want those items, and you may end up spending more overall.

You also see the ‘people who bought this also bought this’ a lot…

This is a really good example of the main way that online retail differs from the real world – because the more a retailer knows about you, the more they can target the experience to you, and ultimately encourage more spending.

And consumer data has long been the most valuable currency of the online world – it’s what companies like Facebook and Google are built on.

But it’s becoming even more valuable today, because we’re all getting a little bit more privacy conscious – and regulations, like GDPR, are bringing the free-for-all around private data to an end.

So your data is now harder to grab, which is making companies, including retailers, work even harder to get their hands on it.

The problem is that, while we are more aware of our data, we still tend to undervalue it. As social media has proven, we’re far too quick to give it away in return for an often small prize.

That’s why a lot of retailers will offer a 10-2% discount code if you sign up to their newsletter. So, give away your email address – or your phone number – and you can save a few euro.

But that information is worth far more to the retailer in the long run

Why?

For a start they can start sending you promotional material on a regular basis, which can help to lead to more sales down the line.

And even if you don’t immediately buy something you see in an email, you’re constantly being presented with items you might want, and you end up back at that FOMO again.

But that email address or phone number is even more powerful than that – because it’s also what you use when you’re buying an item from them.

Once you start to make purchases, retailers can start to build a profile of what kind of consumer you are, what kind of things you look for, what kind of promotions you respond to.

And the more they learn about you, the more they can tailor what you see.

Long ago it was the case that a website or marketing email was the same for everyone – but nowadays it’s entirely possible to show completely different shops depending on who’s looking.

That might differ based on your location, or whether you came via a search engine or a link in an email.

And it could differ based on the profile they’ve built up around you – so if they know you like a certain category of product, they can put that front-and-centre for you when you visit.

This is all about making it easy to spend money, isn’t it?

Absolutely – reducing friction is key here.

A big issue online retailers have is abandoned shopping carts.

This is where people take the time to find products they like, they add them to their basket, and then – for some reason – they don’t complete the purchase.

And the big retailers will pour over the data to try to figure out where the pinch point is – and then find a way to remove that.

A classic example is the checkout process – where you get hit with all of those boxes you have to fill in, and then you need to dig out your credit card, and maybe authenticate the process on your banking app.

And retailers have worked to find ways around that –Amazon’s one click buy button, for example, or having Apple or Google Pay built into their site.

They all mean you can complete a purchase on a website, even one you’ve never shopped with before, without having to type in any personal data – and without having to even give it too much thought.

It’s almost like you’ve not even spent the money… but you have.

So how do you avoid falling prey to all of this?

Being aware is a good, first step. Being more careful about what data you share, and with what sites and apps, is also a good habit to get into in general.

However what’s probably the easiest, and most effective thing to avoid falling for these techniques is to ensure you take a step back when you’re buying online, and try to become more considered in what you’re doing.

Even if it’s only a matter of taking a break for a few minutes, it will help. Though if you can give it hours or even days before handing over your money, all the better.

Doing that may sometimes mean that you do miss out on some real, time-limited offers, but usually it won’t make a difference. The stock will probably still be there, and if not it will probably be back soon.

But what it will do is give you time to think about what you’re spending, whether you need it, and whether you’ll find a better offer elsewhere.

When it comes to bigger purchases, like appliances or holidays, the key is to do your research in advance – and know your budget.

That way you will have an easier time resisting add-ons that you don’t want, and expenses that you can’t afford.