Opposing Views of Holiday Retail

‘Tis the season to read the tea leaves and wonder how fourth quarter will look in a year in which even investment bankers may find themselves shy a few bucks come December.

The National Retail Federation takes the view you’d expect: Brace yourself.

But an interesting opposing view shows up in Advertising Age’s “CMO Strategy” section: that consumers console themselves when they feel powerless or threatened by making attempts to boost their perceived status. Could that impulse be the saving grace this holiday shopping season?

I’m willing to bet few Americans can remember feeling more threatened or less powerful than, um, right now. And that’s before you throw into the mix the effects of election results (guaranteed to make some people feel better, others much much worse), inevitable fourth quarter layoffs, seasonal affective disorder, and your run-of-the-mill Christmas/Hanukkah/family angst.

The study authors measured how respondents compensated with their wallets for feeling powerless.

    “In one experiment, consumers bid on products in a simulated online auction. Compared with high-power or base-line participants, low-power consumers placed higher reserve bids on products associated with status (silk ties, fur coats) but not for products unassociated with status (minivans, washers). Essentially, a temporary state of powerlessness changed consumers’ spending habits such that they were willing to spend more to ‘buy power’ by acquiring status-related products.”

Adam Galinsky and Derek Rucker use the example of a $300 Dualit toaster when a $30 Black and Decker will do, to show “compensatory consumption” — buying something to meet a secondary need beyond toast. The two professors at Northwestern’s Kellogg School of Management at Northwestern University published their findings in a recent issue of the Journal of Consumer Research.

Galinsky and Rucker conclude:

“Although knowing where to draw the line is its own debate, there is an uplifting side of understanding consumer threat and compensatory consumption: Responsible brands can strengthen relationships with consumers by acknowledging the persistent threats they face and helping them cope with the threats in a more appropriate manner — but without promising to be the end solution.”

Who’s going to be up to that challenge this year?

Paris at Christmas by Alexandre Duret-Lutz; Flickr image via CC 2.0