chris alcoran

“It is the most wonderful time of the year…”. I cannot disagree. The world sparkled with twinkling lights, decorated with festive garlands, the air filled with scents of cinnamon or pine, and Christmas songs cheering up the spirit – the magic of Christmas can make us feel like playing part in a fairy tale, even if it is just for a moment. However, as all fairytales have the good and the bad characters, so has the Christmas: there is a particular group which rejoices this wonderful time the most. The retailers, ultimate winners of the holiday hype, gain around 60% of the profits and make approximately 25% of their yearly sales between Thanksgiving (in the Netherlands it would be time before Sinterklaas) and Christmas. Some business would not be able to survive without this demand peak. The Christmas season, which used to be a symbol of family celebration, merry caroling, harmony and peace on earth, seems to become a synonym of everything that is wrong with commercialized capitalistic world. People, preoccupied with standing in lines and scuffling in a fight for another redundant mass-manufactured commodity, lose oftentimes the sentimental value of Christmas celebration. The thorough commercialization of a seemingly spiritual event is not the only one peculiarity of the season. Let’s have a look at other “wonders” that happen in the end of the year.

The “magical” decrease of prices…

Intuitively, I would say that when the demand curve shifts to the right, the prices for goods would rather rise than fall with a stable supply. But time of the Christmas shows something different: coincidentally, the season sales begin just in the time of the shopping hassle. Why do shops actually decrease prices of goods in the season, when people would buy a lot anyways? The reasons are mainly marketing related. Retailers believe that when they attract the attention of a person who wants to buy item from a discount, it is more likely that the purchase will result in buying something at the regular price as well. Moreover, sales create a feeling of urgency, meaning creation of illusion that if one misses the chance of buy item now, such a chance will not come back again. Hence, the idea of “buy now or regret forever” contributes to the impulsive shopping and purchasing unplanned or unwanted things. Also, once something goes on sale, shops have a reason to send customers thousands of emails in order to kindly inform/remind/remind again about that fact. Consumers bombarded with such “great deal” messages may give up at some point and buy things based merely on a need which was artificially created by a retailer.

…and increase of time          

Due to the holiday shopping season, we can “enjoy” the Christmas vibe even longer that it would be rationally assumed. Many shops expand the Christmas seasons by decorating their shops or offering Santa deals already in the late October. The Christmas creep, which is the popular name of this phenomenon, is actually not intended to make you autumn days merry and bright, but again, to increase the sales. Basker (2005) found that longer shopping season results in increase of per-capita retail sales in November and December of approximately $6.50 per additional day over the relevant season. In America, the official Christmas season starts with the Black Friday (last Friday of November, the day after Thanksgiving). Black Friday seems to gain on popularity in Europe as well, even though it is completely unrelated to any cultural context. The day is filled with variety of promotions and discounts, which are intended to boost the demand. Black Friday is followed with Cyber Monday (recent phenomenon, term poplar since 2005), which focuses on online shopping. It is, again, a day of discounts (read: fight for consumer attention), which is dedicated to those who prefer make their purchases via Internet. This year, online orders in U.S. totalled $3.07 billion.

The utility problem

Even though people invest their precious time, effort and good intensions in buying the perfect Christmas present, the reality is oftentimes quite harsh. The receivers are usually less satisfied with the gifts, compared to when they would receive money and choose the gift themselves. Waldfogel (1993) provided survey data which showed that most recipients value their gifts at less than the market price. This phenomenon is considered a deadweight loss of Christmas. Luckily, there are also some positive aspects of gift-giving too. Thaler (1985) emphasized the importance of “mental accounting” in the judgment of utility, namely people tend to categorize and evaluate economic value differently, depending on a situation. Therefore, maybe a person receiving a gift does not value it as high as the market price, but is happy to receive it anyways, because would want to buy it him/herself. Also, the sentiment value, which is difficult to capture in the monetary term, may play an important role in offsetting the deadweight loss.

What makes for merry Christmas

Once everyone comes back from the long and tiring escapade in the shopping malls, armed with more (or less) wanted presents, it is time to actually start enjoying the Christmas time. Having free days and investing lots of money and time in preparation, should (intuitively) be reflected in increased well-being. Nevertheless, the reality shows this not to be that obvious. According to results of study by Kasser &Sheldon (2002): “despite the fact that people spend relatively large portions of their income on gifts, as well as time shopping for and wrapping them, such behavior apparently contributes little to holiday joy (p.324).” On the other hand, individuals who reported a high relative occurrence of being with their families and of engaging in religious activities reported greater overall well-being. Why can this be the case? 1) both family and religion can provide satisfaction of needs for relatedness to others, which is a well-known determinant of positive functioning 2) religious experience might provide a sense of greater meaning 3) family and spirituality are core aspects of the Christmas season, people with these types of experiences meet the dominant social expectations of the season, and thus may be happy because they know that they are being consistent with such expectations (Kasser &Sheldon, 2002). Even though it all sounds pretty straight-forward, many people forget to come back-to-basics and just focus on enjoying time with the dear ones, instead of boost retailer’s revenues.

Even though the most remarkable Christmas madness can be observed in America, the problem is actually quite recognizable across other countries too. Even if just for one day, let’s forget about economy or business and instead, think about aspects which are not measurable in the money terms. I wish you all truly merry Christmas!

“It’s beginning to look a lot like Christmas;

Soon the bells will start,

And the thing that will make them ring is the carol that you sing

Right within your heart!”