Personal Finance

Don’t let online retailers bamboozle you

Aarati Krishnan | Updated on June 07, 2020 Published on June 07, 2020

A study by Princeton University researchers discovered 15 different types of devious tricks used by e-commerce platforms

With non-essential purchases out of the reckoning, many of us were pleasantly surprised by how much our monthly spending fell during the lockdown. With Unlock 1.0 ushering in pay-cuts and pink slips, we may like to remain frugal.

But have you ever wondered what possesses you to buy stuff you don’t need and over-pay for products that you don’t fancy? Well, a September 2019 paper by Princeton University researchers, after studying 53,000 shopping pages from 11,000 online shopping sites, discovered 15 types of devious tricks (https://tinyurl.com/y4l9f62x) that online retailers used to exploit the behavioural biases of their customers. Here are the key ones, adapted by us to an Indian context.

Stocks running out

The lockdown has taught us all about stocking up essentials to avoid scarcity. But retailers and online sellers are adept at creating a perception of artificial scarcity for completely unnecessary products, too.

Ever been lured by a sign on the shopfront that advertises a 50 per cent discount ‘Only until stocks last’? Seen advertisements of mega clearance sales, because the store owner fell on hard times? Ever been offered reward points or discount coupons that will expire worthless if you don’t use them in 10 days?

Such ploys often persuade us to buy stuff we never intended to buy, believing we’re saving a packet.

This is the scarcity bias, a tendency to acquire something even if you don’t need it simply because you think it will get scarce.

Online retailers, too,use this bias to good effect. How often have you been tempted by a count-down timer showing time running out on a sale?

Stayed awake to be the first shopper in a midnight sale? Received notifications that the items in your cart are running out fast?

Well, don’t pay any heed, as they’re all attempts by crafty sellers to exploit your scarcity bias. Quite often, you’ll find that the products you rushed to buy are plentiful later. Every time a retailer tells you something is running out, stop and think if you cannot do without it.

Already invested

Many of us have bought washing machines, LCD TVs and even cars in brands, colours and models we didn’t set out to buy, because the dealer told us that those were the only ones in stock. Having put a lot of time and legwork into physical shopping, we are so invested in the exercise that we’re willing to buy something that’s sub-optimal. That’s the sunk cost fallacy at work.

Though the time or money you’ve already sunk into the buying effort shouldn’t make you throw good money after bad, you often end up doing it. Retailers of consumer goods often use this ploy to push brands or models earning them higher commissions.

Online retailers leverage this bias in many ways. Free exchange policies often tempt you to buy apparel or gadgets that you aren’t 100 per cent sure about. But when it comes to actually exchanging them, guilt or sheer inertia holds you back.

The Princeton study observed many cases of retailers sneakily adding small products, hidden costs (handling/delivery charges are an instance in India) and even subscriptions to online customers’ shopping baskets on checkout. Customers either fail to notice these or end up accepting them because they’ve sunk time into choosing products.

When shopping for big-ticket items, be conscious that the time you’ve ‘invested’ in shopping is nothing compared to being saddled with a sub-optimal product for many years to come.

Be extra vigilant at the billing counter or online checkout to remove unwanted additions.

On the bandwagon

In these days of social media, folks like the validation that the products and brands they’re buying are cool to own.

Cautious folks, when making big purchases, like safety in numbers. Retailers have found many routes to tap into this ‘bandwagon effect’.

Physical shop owners have progressively increased the size of their shopping trolleys so that you feel the urge to fill them up, like others at checkout. Alerts on shopping sites that tell you how many customers already bought or are browsing the same product, and product ads telling you that the T-Shirt you’re eyeing was bought by Virat Kohli exploit this bias.

When buying products online, don’t be overly influenced by online reviews as they could be padded up. Check the worst reviews first for genuine feedback.

Wrongly anchored

When shopping, do you gravitate towards expensive brands that advertise ‘75 per cent off’ from their MRP or a ‘factory clearance sale’? Well, on stepping into the store, we often find that 95 per cent of the retailer’s merchandise is still at sky-high MRPs, with a motley collection making up the ‘sale’.

Most of us end up buying an expensive product that we would have ordinarily skipped at full price, because we didn’t like the stuff on sale.

This is the anchoring bias at work. It makes us value the first piece of information that we receive in a situation far more than subsequent pieces even though they’re all equally important.

Grocery and consumer goods stores use this bias by positioning their most high-margin brands on convenient shelves at the customer’s eye level, while pushing other products to the back or the bottom of their shelves.

In online shopping, retailers present you with more expensive brands on the first page, mix up sponsored posts with your search results and make some brands more visually appealing than others.

The Princeton study found sellers using even dirtier tricks.

They used trick questions with double negatives – “Uncheck the box if you don’t prefer updates” to confuse customers into clicking on the wrong option. Some retailers framed bona fide options as shameful choices to manipulate behaviour with options like — “No, I hate saving money”, “No thanks, I like paying full price”. Don’t let such questions emotionally manipulate you!

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Published on June 07, 2020
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