What pull does Costco have over my wallet? How do warehouse club retailers, or online bulk sellers like Amazon's "Subscribe and Save," get shoppers to spend more than they planned? Here are a few factors that go into it — make yourself aware of them, and maybe you’ll avoid buying more than you need.
People shop in bulk to save money, but low prices aren't the only way the stores entice shoppers to spend. Costco makes most of its money from annual membership fees, which help it maintain low prices. Feeling that they're getting good deals as soon as you walk in the door encourages people to buy more than they need, says psychotherapist Judy Belmont.
"It’s unbelievable how low some of those prices are," Belmont says. "So people end up spending a lot more."
This never occurred to me until behavioral and marketing psychologist Elliott Jaffa pointed it out to me: There’s no music playing in the background while shopping. "They want you in that store forever," Jaffa says. There’s no fast music to make you shop faster or slow music to encourage you to meander through the store."
Large sizes that look like deals
If bigger is better, then buying more of something bigger is that much more of a savings, or at least a perception of savings. The sizes and quantities of products are not what people are used to, Jaffa says, so a four-pack of 32-ounce bottles of ketchup looks like a deal worth buying. Never mind that you may never use all of that ketchup before it goes bad. You have to look at the unit prices — sometimes marked, sometimes not — and compare it to other stores' unit prices to figure out if you are truly getting a good deal.
"I’ve got to believe they (Costco) have some of the best psychologists in the country who work for them," he says, "because they have the best suppliers and know how to price it."
Whether it’s a warehouse club or a grocery store, product placement is key to getting shoppers to buy, says Rob Jager, a business and management consultant who has worked for numerous big-box retailers. Cameras, computers and other tech equipment don't provide a large profit margin for such stores, who put those items at the front of the store so that they get a lot of turnover.
The ends of aisles, or "end caps" as they’re known, are prominent spots that suppliers often pay for. Signage may make you think the end cap products are great deals, but check twice before grabbing the product. "I think shoppers have been trained to believe that’s where the deals are," he says. But it might just be that that's where the ad dollars are going.
A treasure hunt
Since stores like Costco change their merchandise often, you never know if what you see on sale today will be there the next day if you decide to go home and think the potential purchase over. Finding new things in a warehouse club is a treasure hunt and gives shoppers a sense of intrigue when they walk in.
Marketing expert Harry Beckwith, who has Costco as a client, says that his best friend can’t go to Costco without telling him about the three incredible deals he got there. This friend is wealthy but shops at Costco because it makes him feel clever and smart. It turns shopping — something he normally dislikes — into a game he loves.
Survival of the fittest
Face it, walking through a huge store can be a hassle. The parking lot is usually crammed, the store is full of people pushing huge shopping carts that are difficult to maneuver and checkout lines are long. It’s not an easy trip, so once there, you might as well make the best of it and buy as much as you can so that you don’t have to do another trip soon.
Sam’s Club, for one, gets members to buy more by tracking prior purchasing patterns and then offering customized deals, says Bruce D. Sanders, a consumer psychologist and retailing consultant. The Sam’s Club program, which requires an extra annual fee, uses predictive analytics to determine which items would be attractive specifically to you, and then offers you discounts on those items. This includes items you’ve never tried before but the computer figures you’ll probably get in the habit of buying, he said.
Sam’s Club is creating what consumer psychologists call the "endowment effect" by encouraging shoppers to buy more because they’ve paid for the ability to get rewards and are motivated to use the privileges, Sanders said.