Imagine yourself in the shoes of Rebecca Bloomwood, the main character in the movie "Confessions of a Shopaholic." She's walking through a busy mall, surrounded by the sights and sounds of holiday shopping. The cheerful music and the smell of delicious food make her feel happy, but also a bit overwhelmed. Before she knows it, she's walking out of the store with an armful of purchases she didn't really need. Sound familiar? This scenario illustrates a common behaviour known as impulse buying or unplanned purchases(Widyastuty & Untari, 2021).
Impulse buying behaviour, a phenomenon characterized by unplanned purchases driven by emotions and situational factors, has gained significant attention among researchers in recent years. Existing research finds that such purchases are primarily influenced by factors such as the desire for immediate gratification, social pressures, and limited self-control. These behaviours have been observed in both physical stores and digital marketplaces.
At the Sweet Spot:
In the context of Asia, There is a shift in how individuals are buying. One reason is due to the demographic sweet spot of ageing consumers, rising incomes, and e-commerce growth creating a mix of consumers with disposable income and easy access to whatever their heart desires.
Projections indicate that by 2030, 80% of Asia's population will be part of the consuming class.(McKinsey & Company Report).
Another factor driving change in consumer behaviour is the increasing preference for renting, subscriptions, and eco-responsible consumption. These shifts are broadening consumption patterns beyond traditional income-based models and creating new avenues for consumption (McKinsey & Company Report).
In an environment where everyone is consuming, it can be difficult to resist the temptation to consume as well. This is especially true when we are surrounded by friends and family who are buying things. Social influence and trying to keep up with the jonses is hard to resist, and it can lead us to make impulse purchases that we may not have otherwise made.
Looking at India, impulsive purchases have also been observed and studied. With an average of 17 hours spent online per week among the youth (Retailers Association of India and Deloitte, 2019), the ease of buying and immediate access to information and entertainment contribute to the allure of impulsive purchases made through online platforms.
According to G. Muruganantham & Bhakat(2013), early research indicated that novel experiences or an escape from routine patterns play a significant role in online purchasing. Furthermore, a significant proportion of online sales, nearly one-fourth of Amazon.com's sales, are prompted by impulsive purchases brought about by product recommendations(Rani & Catherine, 2023). Furthermore, a recent study conducted in Odisha has shown that a significant portion (70%) of grocery purchases were made impulsively. This heightened accessibility, combined with disposable income, has only served to enhance our inclination towards impulsive buying. Hence, It is important to delve into the reasons why we engage in impulse buying behaviour both online and offline.
Why we can't stop buying
The answer lies within our very own brains. Two primary neural systems guide our decisions, especially those pertaining to finances. First, we have the limbic system, associated with the midbrain. A key player in driving our impulses, this system is attracted to immediate gratification and responds preferentially to rewards available right away. It's the system that goads us when we see a discounted product or get drawn into attractive marketing. It's less sensitive to delayed gratification or future benefits, focusing instead on the immediate rewards that we reap when we make a purchase. On the flip side, we have the lateral prefrontal cortex and posterior parietal cortex. This system allows us to consider the long-term implications of our actions. Like a prudent financial planner, it helps us weigh the trade-offs between now and then. It coaxes us to think about saving our money for future use, rather than spending it on a whim.
According to Samuel M. McClure et al.'s study, "Separate Neural Systems Value Immediate and Delayed Monetary Rewards," the two systems are often in direct competition with each other when decisions are made. Which system wins in this internal tug-of-war? It hinges on which system is more activated at any given moment. External factors, such as engaging advertisements or product promotions, can tip the scale towards the limbic system, nudging us into the territory of impulse purchases.
Can we resist?
In the context of impulse buying, the allure of instant gratification can often cloud our judgment when making purchase decisions. However, impulse buying has been found to have negative consequences. Research indicates that it can lead to financial difficulties, excessive clutter, and feelings of guilt or remorse.
To address these issues, it is crucial to delve into the psychological factors behind impulsive spending habits. Merely educating individuals about financial literacy may not be sufficient in curbing such behaviours. We also need to understand how our minds work, how our emotions and motivations shape our spending habits, and how external factors influence us. In "Confessions of a Shopaholic," the main character Rebecca struggles with all of these factors. Her experiences provide a compelling case study of the tug-of-war between our short-term desires and our long-term goals.
There's plenty more to discuss on this so we'll be reaching out to you again next week. Till then we leave you with some resources to delve deeper on this topic:
