Sunday, June 7, 2015

Vigilance and Shopping Fatigue

The idea that sellers may go to extraordinary lengths to get you to turn over your money is not new. The mere fact that the phrase caveat emptor (“buyer beware”) is written in Latin, a language that has been extinct for centuries, tells you that the risk inherent in buying things goes back to ancient times. A modern (well, nineteenth century) phrase is “Hold on to your wallet” — someone may persuade you, just for a moment, that a purchase is a good idea, but if you turn over your money, you may regret it within minutes.

Shopping has been a minefield since before minefields existed, but something has changed within the last year. Anecdotes and U.S. economic aggregates point to a new kind of shopping fatigue. In spite of improving consumer finances, it seems impossible to have two strong months at retail in a row. After people get out and do their shopping, they need a break, several weeks off before they are ready to do it again.

This past winter, we saw aggregate consumer spending go down in bad weather and recover when the weather improved, as you would expect. But shopping then fell off again, for no apparent reason other than that people had just been shopping and had had enough of it for the moment.

The aggregates can mislead because they disproportionately represent the activity of the top 10 percent of households by wealth and income, who own most of the country and provide more than half of consumer spending. In this case, this emphasis of the aggregates might be telling us something. Perhaps the people who are doing the most shopping are feeling the greatest shopping fatigue. But it is obviously not just them.

I became acutely aware of shopping fatigue in myself earlier this year after I bought a car. Having spent more than a month’s income all at once it is understandable that I would not be in a hurry to go out and spend more. My financial statements tell the tale: I spent just four days of income over the six weeks that followed. But it is not just a wealth effect. Now that I am looking for it, I see the same effect when much smaller amounts of money are involved. Yesterday I spent an hour shopping at one store and brought home a bag of clothing that cost less than $100. Once home, I wasn’t willing to go out again for groceries. That could wait a week. It is just this kind of decision, when a consumer is willing to risk eating dull food for a week to avoid having to face another shopping experience so soon, that makes the aggregate consumer mood look worse than it is. This is just my own story, but I am hearing similar stories from all sides.

Assuming that this newfound shopping fatigue is a real phenomenon, where might it come from? I can’t talk about fatigue of any kind without mentioning the sleep problem, and consumer time pressure and the resulting sleep deprivation are surely part of the story. At the same time, I can think of two known structural changes that might have the effect of making consumers more wary of shopping.

First, there is Apple Pay along with similar initiatives that aim to make in-person electronic payments more effortless and frictionless. Consumers benefit from the time savings, but the new ease and invisibility of payments also means that you can spend money faster than you might expect. A consumer might look at balances at the end of the day, see for the first time how much money has been spent, and feel that something went wrong. It is that feeling that something went wrong that translates to a wariness the next time. Apple Pay hasn’t reached so many shoppers in its early test phase, but it is disproportionately represented among the wealthiest shoppers so its effects already matter when you add up the money. Meanwhile, the shoppers who have to be on guard to avoid overspending will find shopping more wearying than before, not less.

Second, retailers have more skill than ever at collecting useful information on consumers, using a technology often categorized as data mining. Retailers use this information to tune their operations and promotions to boost revenue. I worked in this field in the 1990s, but what we did then was nothing compared to what is going on now. It is the shoppers, though, who are being optimized against, and when you take on a shopper’s point of view, it appears that retailers have more skill than ever at catching you in an unguarded moment and separating you from your money. This experience too can make people less eager to go shopping the next time. Again, as retailers follow the money they tend to tune their pitches mainly to millionaire shoppers, so those are the shoppers who may be feeling the greatest fatigue at the end of the day. Any shopper may be affected, though. Facing a barrage of messages tuned to millionaires, some of them will resonate with you just by chance regardless of your personal wealth. Having to cut through the pro-spending impulses that come from a finely tuned retail environment takes energy and takes away the sense of ease that otherwise might go with shopping.

I am not asking for sympathy for millionaire shoppers, but their experience may be taken as a warning of what is ahead. If millionaires are facing the cutting edge of shopping optimization, the same tricks will reach the rest of us in just two or three more years as the technology advances. For a short time, retailers’ new technology might squeeze more cash out of shoppers than they meant to spend. That pattern obviously can’t be carried forward. The U.S. consumer economy is overreaching and will have to scale back slightly. As that happens, I expect to see the retailers that optimized the best fall the hardest.