Have you fallen prey to “spaving”?
It’s probably happened to all of us in one way or another. And who can blame us? Since President Joe Biden took office, inflation has skyrocketed, wage growth hasn’t kept pace, supply chain disruptions are frequent and more and more Americans are living paycheck to paycheck.
Thus, when we see what looks like a deal that could save us money, we jump on it.
Retailers know this — and they know how to milk cash from the impulse as well.
“Spaving” is a neologism that combines two words that should be opposites: “spending” and “saving.”
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However, in this economy, more and more retailers are finding ways to convince buyers that they can save a bit by spending a bit more.
It’s not necessarily a new concept. Buy one, get one free. A credit card that gives you points. Add a few extra bucks to your Amazon basket and you get free shipping. Coupon codes. In-store “cash.” The list goes on and on.
However, as CBS News noted in a May 13 piece on the phenomenon, spaving “rarely benefits the consumer.”
“Instead, retailers’ clever marketing ploys convince consumers they’re getting a deal, when often they’re just overspending,” the outlet said.
Have you noticed a dramatic increase in store prices?
“I understand the appeal of getting to checkout and a notification pops up saying spend $10 more to get some perk,” said Jacob Channel, a LendingTree senior economist.
“But 90 percent of the time, when you break it down, it doesn’t make sense,” he said. “You’re not actually saving money if you are spending more of it.”
“Retailers have always known this trick, and they’re really good at what they do,” added Rachel Cruze, a personal finance expert.
“They know that if we put a sale on or offer free shipping if you spend ‘X’ amount, you’ll spend more money,” she said. “Psychologically, they’re good at knowing how to entice people.”
None of this, of course, is illegal per se, unless it involves false advertising. In fact, this tactic has been around since time immemorial, but the fact we have a name for it is indicative of how widespread it’s gotten.
However, canny consumers need to be mindful about just who is benefiting from these “deals.” Almost all of the time, it isn’t the consumer.
“You see different examples like that all throughout the economy,” author Bryan Kuderna told Fox Business.
“And where it hurts the consumer is if it encourages them to essentially waste money to buy more than it’s necessary, just so that they feel like, ‘OK, now I’m getting the deal,’” Kuderna said.
“They’re all just different marketing ploys to get consumers to buy more, and in certain instances that works great,” he added. “If we’re using coupons to get what we need, and we also got a bargain at the same time, then certainly it’s a win-win. But as we see so many times … it’s not.”
While the exact numbers on how much “spaving” costs American consumers are difficult to ascertain, there are a few eye-popping statistics that indicate just how bad the problem has gotten under the current administration.
“From 2021 to the end of 2023, credit balances jumped 47% – the steepest three-year climb on record. Credit analysts also predict the 2024 first quarter credit card debt will likely smash record highs,” Fox Business said.
Furthermore, CNBC noted that between March 2023 and March 2024, companies had increased temporary price reductions by 72 percent and promotions were up 15 percent. If “spaving” weren’t a phenomenon, of course, that would mean consumers would have more money to put away. However, the April personal savings rate was only 3.6 percent, down from an all-time high of 32 percent in April 2020, at the height of the pandemic.
“Consumers are hyperreactive to deals because they feel like they have less money than they’ve ever had,” Melissa Minkow, director of retail strategy at consulting firm CI&T, told CNBC. “It’s just a weird mix of variables that is creating this very unique retail environment.”
Indeed, when the economy is lousy, there’s the tendency to jump at any opportunity to save money.
However, it’s worth remembering that corporations aren’t just offering these deals because they’re nice and want to take a load off your finances. As with casinos, the bedrock reality is that the house always wins in the end.
So, how to avoid “spaving”?
The answer is simple and intuitive, if perhaps harder to follow than it sounds. To quote Kuderna, “buy what you intend to buy.”
“Don’t buy what you feel pressured to buy,” he said. “That’s when you become almost like a victim of the marketing ploy. And that’s obviously good for the retailer but not good for the consumer.”
Yes, that may feel difficult in the era of Bidenomics, where any potential “deal” is easy to jump on before you even think about it.
Do yourself a favor, however: Pause, reflect and then think of what the real cost of “spaving” will be. Odds are that it’s not going to benefit you.
