Generation Z is the largest generation of consumers ever. They account for $29 billion to $143 billion in direct spending. Consumers now spend more than they ever have, partly due to the rise and convenience of e-commerce. The pandemic has also increased the need for online shops, which have helped consumers stay safe.
However, regardless of the pandemic, consumers are spending much more money and buying many more things than they ever have. But why do we buy so much stuff that we don’t need?
Consumer psychology is the study of how consumers behave. It studies how “our thoughts, beliefs, feelings and perceptions influence how we buy and relate to goods and services”. Understanding how consumers behave is a vital part of retail marketing and sales.
However, consumer psychology can be difficult to grasp as shoppers’ expectations tend to change with technology and culture. The biggest cultural change in the last year is the Covid-19 pandemic, which forced people to stay at home. A consequence of this was that e-commerce usage boomed while in-store retail suffered.
Why do we buy so much?
There are several theories. Firstly, it is important to think about consumer behaviour in terms of motivation. In psychology, motivation tends to be divided into two categories: intrinsic motivation and extrinsic motivation. Intrinsic motivation refers to “when people make decisions based on their personal wants and needs”, whilst extrinsic motivation is when “people make decisions based on external factors” such as brand name or style. Extrinsic motivation is becoming much more common with the rise of social media. 71% of social media users are more likely to buy products based on social media referrals.
The Diderot Effect can explain overconsumption. It says that “obtaining a new possession often creates a spiral of consumption which leads you to acquire more new things”. As a result, we end up buying things that we previously never would have to feel happy or fulfilled. For example, if you buy a new dress you immediately begin to look for new shoes to match it, or new jewellery. You wouldn’t have bought these new shoes or new jewellery if you had not bought the new dress.
Has online shopping made us more likely to buy stuff we don’t need?
E-commerce grew by 46% in 2020 compared to 2019. This was the largest increase since 2008. Shoppers around the world spent $900 billion more on e-commerce sites versus the prior two-year trend. E-commerce sales made up around $1 out of every $5 spent on retail globally - an increase from around $1 out of every $7 spent in 2019. Consumers buy much more than they did even a decade ago, which leads to the question: Has online shopping made us more likely to buy stuff we don’t need?
The answer seems to be ‘Yes’. 77% of consumers who have purchased more online during the pandemic, admitted that they expect to continue to do so after it has ended. Online shopping is much more convenient than a physical store. For example, there is no need to set time aside to travel to the store or queue. Consumers can shop from websites at any time and it is often easier to get detailed information about products.
One in eight adults spend more than they can afford online and almost one in four buy things they don’t need. Furthermore, “Britons collectively spend up to £1 billion every month on impulse buys”. Consumer psychology is being used by retailers to shape our online shopping choices and often make us buy stuff we don’t need. There are a number of ways retailers do this. Many retailers will create a sense of scarcity around a product. This makes consumers more likely to act quickly and buy impulsively.
Another popular method employed on retail websites is social proof, such as reviews and recommendations on products. If a product has already been tried and tested by other consumers we are more likely to buy the product. Humans copy each other to fit in.
Frictionless paying, such as one-click and guest checkout options help consumers to pay for their items quicker. Buy now, pay later options, such as Klarna, Clearpay and many more, have also become much more popular in recent years and “give the illusion of payment flexibility, and therefore, affordability, while playing down that it is a form of debt.”
Retailers have used consumer psychology to make online shopping more appealing to consumers. Whilst many of these tactics have made online shopping much easier and seamless they have also led to a vast increase in the quantity of products consumers buy and the amount of money spent during transactions.