Transcript
Emma Atkinson:
You're listening to RadioEd,
Matt Meyer:
the University of Denver podcast.
Emma Atkinson:
We're your hosts, Emma Atkinson ...
Matt Meyer:
...and Matt Meyer. Welcome, friends, to a special holiday bonus episode of RadioEd for all about gifts. We're changing things up a little bit and hosting a roundtable on economics and cultural differences of gift giving. I'm Matt Meyer and you'll also hear Emma Atkinson joining us in studio alongside professors Melissa Akaka and Ali Besharat from the Daniels College of Business.
Emma Atkinson.
Welcome, Melissa and Ali, can you both describe a little bit more about what you do at the University of Denver?
Melissa Akaka:
Sure. My name is Melissa Akaka. I am an associate professor in marketing and the Daniels College of Business and my colleague here, Ali Besharat, we codirect a research center called the consumer insights and Business Innovation Center, and I also recently became the director of the MS marketing program.
Emma Atkinson:
Oh, congratulations.
Melissa Akaka:
Thanks.
Ali Besharat:
My name is Ali Besharat, Associate Professor of Marketing in the Daniels College of Business. I'm also co-director for consumer insights and Business Innovation Center, which we refer to it as CIBIC.
Emma Atkinson:
Okay, wonderful. Wonderful. So, today we're going to talk about gifts, right? Could you really quickly just share a fun or quirky gift giving tradition that you share with your family?
Melissa Akaka:
Oh, um, we used to do pajamas on Christmas Eve, like I love the kids open one president and it was always pajamas on Christmas Eve. But then we recently started shifting the tradition to do pajamas on Thanksgiving because my brother would come and visit. Um, so every year we gift the kids, everybody gets a family pajama. And then we take one big family photo this year where the Grinch is?
Ali Besharat:
Oh, yeah, same thing, actually, for on Christmas Eve, we open one gift, usually in our pajamas anywhere then the next morning, the entire family and we go for a family walk. Yeah, in your pajamas. In the neighborhood, kind of embarrassing tacky? Well, we do it.
Matt Meyer:
Perfect. That's awesome. Well, many cultures have some form of gift giving associated with the holiday season. And the form it takes often varies. In your experience. Have you noticed differences based on where you are? who you're with?
Ali Besharat:
Yeah, sure. I mean, throughout my education in the US, and having an international background meeting a lot of international folks, I've noticed different etiquettes and also preferences for gift giving. I know a lot of my Asian friends, actually, they have different agenda for gift giving, like I was looking at some of the norms, they usually and even in Middle East is the same way that they usually present a gift with two hands as a respect. And the courtesy is the recipient usually does not open the gift up on receipt, because it's rude to open the gift up on the receipt, you have to wait until the gift is gone. And then you open and there's expectation for reciprocity, and also the value comparison. So usually you try to exchange a gift in the same similar value and return the favor. But in the US, usually people do not assign monetary value to the gift as much or we don't assess the value of it as much. So it's just a nice gesture. That was a sharp contrast. I noticed that here.
Emma Atkinson:
right. So with like a housewarming gift, you would bring a bottle of wine, but you wouldn't expect you know, the person with the new home to give you anything in return. Right? Okay,
Melissa Akaka:
so I grew up in Hawaii, and I'm half Japanese. And I was and the the majority of people who live in Hawaii are of Japanese descent, Asian descent broadly, but many are Japanese. And one of the things that we do both from Hawaii but also like that ties back to Japanese tradition, as we give gifts when we travel, we give gifts on just kind of occasions where we don't see someone for a long time, and we call them Oh, Miyagi. And they're basically a a gesture of just kind of like a greeting gesture or something that you bring back smile when you travel souvenirs, those kinds of things. Yeah.
Ali Besharat:
And another thing culturally speaking of that, is you have to insist a few times for the recipient to accept the gift. So it's not a on the first try, everyone's going to Oh, thank you so much for the gift, you have to insist a few times. And still my parents, whenever we want to give them a gift, they do not accept that they refuse as a courtesy. That's like a culturally speaking in Asians on the same way, then, you know, that's just a respect to the obviously gift giver to say that we really appreciate it being too humble and kindness is known. I don't deserve it. But eventually they're gonna accept that, but you just have to insist a few times.
Matt Meyer:
So you kind of have the differences with with gifts versus cash versus gift cards, versus experiences, in the course of your research are kind of through personal experience. Have you noticed that changing over time? Or is that something that has kind of developed in the US just over the years?
Ali Besharat:
Sure, I can take that. So I mean, research shows that experiential gifts are definitely better at maintaining and building a relationship than the material gift. So there are a ton of research to prove go back to the psychology to have established that and actually, I was looking at some of the stats, especially in the UK, and Europe as well as Australia, the experiential gifts are definitely getting more trendier. And that trend has started picking up in the US since 2018, though, which was very interesting. And one thing I noticed that is they're trying to get to the bottom of it that why experiential gifts are better than material gifts and they found two main reasons for them. One was the happiness about the gift and the other one was the connection. If you could allow it to build even among teenagers, they found that as soon as you pass the age of 12 experiential gifts has substantial effect on the memory as well as the enjoyment of the moments you spend time with the family and friends as opposed to, you know, getting a material gift to you forget everything gets obsolete when you use it. But for children between three and 12, still, the impact of material gift was higher than an experiential gift.
Emma Atkinson:
Yeah, like a Barbie doll. Right? That just makes your whole year as a little kid, right? Yeah.
Ali Besharat:
But for adults, definitely the impact of it was higher than material gift in terms of the connection building that relationship.
Matt Meyer:
Is there any kind of difference in terms of expense or spending over time related between material gifts and experiential gifts?
Ali Besharat:
Yeah, so again, I did some research on that. So what we found that like millennials, so Boston Consulting Group did a survey back in 2021. And they found that 78% of millennials still gather as their money on experiential gifts rather than material gifts. This is changing. However, when Deloitte Consulting Company and do this survey back in 2020, they found that still 72% of respondents reported that they would still buy material gifts as their last or some of their gift options to the to the recipients. But what is interesting is the number of or the average number of gifts per customers is dropping in the US. So the average number of gifts back in 2021, that people gave away was 16. And it's trending down to become around nine this year, the anticipation of it. So we see that, you know, it's so either people are purchasing more expensive gifts, which I doubt, or the nature of it is changing, which was interesting. And also, we see that last year, there was an increase of 7%, and concert tickets and restaurant purchases as gifts that people gave away. So it was just huge.
Emma Atkinson:
That is huge. How much of that do you think has to do with the pandemic and the economic and financial consequences of the COVID 19 pandemic.
Ali Besharat:
I mean, it's really hard to tease it out and only find the soul contributed to this kind of trend. However, I feel like COVID has something to do with it, people definitely stayed home for so long, their lifestyle change, unwillingly. And now that things are kind of easing up, and they want to go back and kind of enjoy themselves. And probably the moments of enjoyment people assign higher weights to it, because they missed it for quite some time. And they want to get back to it. So I assume they should be some contribution of COVID to these positive trends received toward the experiential good. However, it's really hard to kind of pinpoint that this is the main driver of the trends.
Melissa Akaka:
I would say one other thing that I think is influencing these shifts is this movement towards like, sort of a minimalistic, less is more kind of approach to material things could partly be in relation to Kobe, just because you're in our home for so long. And you have so many things and recognizing that, you know, it's better to just spend time with people than it is to curate all these artifacts. And I think that that is actually helping impact maybe the more giving more experiential gifts, but also giving less gifts, right? Like, let's make the ones that we give more meaningful than having so many that the meaning gets lost among them.
Emma Atkinson:
Right. And I know for quite some time, there's been a big debate about gift cards specifically, you know, is giving a gift card taboo, is it too impersonal? Like how does that go? In your opinion?
Melissa Akaka:
Well, if you ask my 13 year old, she loves gift cards or cash, she'll take either of them in any form you can give them to her. And so I think that also depends kind of the person that is receiving the gift. And gift cards are hard, though, because if you don't get them the right gift cards, I mean, there's tons of evidence that gift cards don't get spent. And so there's a lot of lost, you know, for the businesses, they have to keep them on their books. So they have to track the gift cards that could be redeemed, but at the same time, that gift receiver might not actually benefit from the gift ever. It's just becomes a bunch of cards in a drawer or something.
Emma Atkinson:
Wow, that's so interesting. I had no idea that so many gift cards went unused.
Melissa Akaka:
Yeah, tons.
Ali Besharat:
Yeah. And I want to circle back to that report that I kind of referring to the Deloitte study that they did. And they found that millennials and Gen Z necessarily, they do not like to receive cash as a gift because they feel the lack of individualism for those kinds of gifts. They feel like you know, the person who gave me the gift didn't spend enough time to think about what I need or what I demand or what would fit me better. Gift cards are a little bit different. I agree with you, because at least there are some thoughts behind it that Oh, I know you shop at Amazon. But here's a $50 amazon gift card, but it's like a gift receiving a $50 Cash even though cash is king and the value of the monetary value of it. And in terms of the face value actually, probably is more valuable than other gifts because if there's a lack of faith, you can't do anything with that paper unless there's a gift receipt and there's exchange policy. There's a lot of things that goes in it. However, the lack of individualism or care that people find in a cash gift, especially millennials who said that they do not want to receive cash gifts.
Melissa Akaka:
That's so funny. My parents have been giving me cash probably since I was 10 for Christmases and birthdays and everything in between.
Emma Atkinson:
And do you like it?
Melissa Akaka:
No, I'm I'm a millennial. Yes, that's true. I can tell you teenagers like cash.
Ali Besharat:
I'm talking about Gen Z, we don't know much about Gen Z. But from millennials, at least this study that Deloitte did, I don't know, look carefully into their sample size, but they were reporting that the cash and gift usually are the least desirable options for recipients, because they're saying that the person who gave it to us they didn't care much to learn more about us or spend some time to think about us.
Matt Meyer:
We talked a little bit about kind of the the differences in different international communities and how it varies from country to country, is there any research kind of in the differences between gift cards and cash and some of those other things from from country to country or region to region?
Ali Besharat:
I didn't find any specific data on cash versus gift cards versus experiential kits. However, I found that in terms of gift giving, the size of gift giving an amount that people spend, a UK is leaving, in terms of the average they spent on gift giving is almost $1,300 per individual in the UK, there is in 60, and the US is 1300. On average, and Canada having the third place is $964. But I couldn't break it down into types of obviously gifts that they purchased, it was really hard to because some some countries don't track it as well as we do. So I couldn't find that information on that.
Emma Atkinson:
Right. That makes sense that America tracks that religiously. Right. So kind of switching gears a little bit. How does American gift giving affects like the yearly commerce cycle?
Melissa Akaka:
Okay, so like based on seasonality and holidays, and birthdays and that kind of stuff? I mean, for sure, the winter Christmas holiday season is the biggest spending gifts spending season throughout the year in the US? I'm sure I'm sure. I mean, I don't know the numbers word, but I couldn't put money on it. If I had to call their cash. Yeah. Well, I mean, I also used to work in retail. So like, I've definitely seen like within these retail outlets, or retail stores, the percentage of earnings from that quarter versus any other quarter throughout the year is substantially more. And so I certainly think that is how retailers will set up their sales promotions, they'll set up their inventory, they'll set up all of these things so that they can ensure that they make the sales goals they need to make in that fourth quarter in order to be able to compensate for the rest of the year.
Ali Besharat:
Can I also add a little bit of context so that I agree totally with your point. So I also collected some stats on this one, too. So I found that almost a third of all retail sales in the United States happening between Black Friday and Christmas Day, which is huge. Wow, there's like basically a month and half almost covers that 1/3 of the total sales in the US. And I was looking at some digital metrics. And I found that the ad impressions usually is increased by 50%. During the holiday season, click through rates rise 100%, direct traffic to the website increased by 150%. And the average order value, the size, an order, the value of the monetary value of the order usually grows by 30% during this time, and the conversion rates also go up to 60%. So it's huge for marketers, so obviously all not all months are created equally. So you have to budget for those and in terms of the planning for the marketing and the supply chain and the delivery of the products to the shelf. So make sure that that's the best time to make them available in terms of the sales promotion. But also availability of the product is very important how you're going to budget and there are so many different venues that you can advertise Promote your products through the online offline channels and email marketing and social media,
even a product that you carry to so that's when you'll see like a lot of big gifts that's come out and like products or packaged products for gift giving specifically, versus what you would normally buy for yourself.
Emma Atkinson:
That makes a lot of sense. You know, just anecdotally Black Friday, you know, that just passed. What did you guys buy on Black Friday?
Melissa Akaka:
I bought a lot of stuff for myself.
Ali Besharat:
Nothing, seriously, because they continue, I just don't want to use one day so well. So
this is an interesting thing too, right? Like Black Friday used to actually be like a day where everyone has bought all the things in store on that day and would like fight for inventory fight for products. And so stores had to back to this inventory slash, making sure they're prepared enough to training all of those things, they had to prepare for that one day. Now, Black Friday blends into Cyber Monday blends into beat pre and post Black Friday, Cyber Monday. So the inventory has to stretch out further. They need to be able to staff longer and as opposed to that one day. So businesses have to really think through how these shopping holidays have changed and account for that.
And on top of that, I agree totally regio. So there's definitely a stretch the time window for shopping for Black Friday and Cyber Monday. So instead of being one or two days, it's usually a week or even beyond that, but also a lot of retailers not to leave bad taste in mouth of the consumers, they decided to do the price matching for a lot of items, which were on sale during the Black Friday event or Cyber Monday because a lot of customers say, Oh, I missed that, you know, sales window. However, you guys advertise this, can you honor it? And then you know, they usually do that as a response to the customer. So they say that, you know, let's keep it for a longer period of time. And you don't have to necessarily shop on Black Friday. That's why I didn't do it. I was just trying to get it over with.
Matt Meyer:
Is there any data on how much people typically spend, whether it be on Black Friday or just for the holiday season in general? And does it differ between America and other countries?
Ali Besharat:
Yeah, so I found that Americans last year spent 886 billion on gifts during the holiday shopping 514 billion of us for the family and the rest of it was work related or family related, however, for this year is expected to grow that number to become $932 billion. And also I found that unfortunately, Americans are the fares, you know, country that feel like they're in debt after holiday shopping. So 22% of the population that which were studied by Deloitte, Americans indicated that they feel like their debt followed by UK 90%, Romania 17%, and finally, Australia by 14%. So Americans, we're leading in that regard as well. So we spend a lot of money however, we don't budget properly, or we kind of overspent during the season, when one in five individuals feel like they're in debt.
Emma Atkinson:
Wow. Okay. Well, that is a perfect segue, because you know, what we're going to talk about next is layaway, or buy now pay later plans. Right. So we've talked a lot about gift giving. But now let's kind of switch gears into how we pay for these gifts. Let's talk what's kind of the history of this practice? Because it's not new, right?
Melissa Akaka:
Oh, I mean, I think we have been in like a society in debt for a very long time. And that's how we spend oftentimes. And I think that's, it's an unfortunate situation, for sure. I feel like that, but it definitely been around for a while. I don't think that any of that is very new.
Ali Besharat:
I think the history of it started back in 30s, when we were experiencing great recession, and layaways. And obviously, they were very popular, it started with retail stores kind of holding on to their products, so lay them away. So people made a deposit and a few installments. And after they finished installments, they were able to come and pick up the product to help families to purchase for holidays and also budget for it. And it was very popular all the way to 90 navies. And then things changed. So they felt that you know, with the invention of the popularity of credit cars, that kind of slowly went away. But again, when we experience again, another recession, if you remember in late 2008 2009, all the way stretch to 2011. Again, the layaway practices returned and still to date a lot of physical stores they honor it, I think like big loss, does it Kmart does it sears and Marshalls but they're only in the store not in an online environment. That's why you get the buy now pay later kind of practice has become very common. And we can talk about it you know, how are they different versus credit cards and cash all those things? Whatever you want to talk about?
Matt Meyer:
How are they different like the Buy Now pay later versus layaway versus putting it on a credit card?
Melissa Akaka:
Sure. I think the layaway they hold inventory for you, right? You come and you make payments until you can actually pick up like if you're buying a large TV or something like that right? Buy now pay later is they do a payment plan I believe that comes following probably directly with the retailer that sent it to or with whoever however they're building up their credit that they're allowed to give. And then credit cards are a completely separate entity, right? They're like a third party that you're borrowing money you're getting from this credit card company, and then you're paying them back separately. So it's kind of a separate entity.
Ali Besharat:
Yeah, and also the buy now pay later you can only have a short window to pay the whole balance usually is a structured the most practices for for installment plans. And if you want to have more flexibility in terms of payment, there are some obviously fees associated with it layovers? Obviously they don't have that structure. So there's no fee associated with installments. That's number one. Number two is if you default on the payment there are reported to the credit card bureaus. Buy now pay later correct, but not for layovers. Yeah so for customers who are obviously vulnerable in terms of their credit scores, or they feel like they might be at high chance of default for the payments, it's a safer option if it's available to them, to go through the layover options versus like now pay later structure. But if you take credit cards, obviously how you pay interest, so if you put it on multiple installments, it accrues interest and we can go grow bigger and bigger and the interest rates on the credit cards are quite high, but the Buy Now pay later structure usually the either the interest rates are lower, or they're not a lot of AP payments, or the penalty is very small compared to the credit cards. So that might be a better option for a few if they have access to those.
Matt Meyer:
So in your opinion is layaway. Kind of the more consumer friendly option of the three or is it just kind of depend on the financial situation of the individuals involved.
Ali Besharat:
I think it depends on the situation of the customer in my opinion. So again, if you have really low credit score or you feel like you know, you may lose a job or your job is not necessarily 100% Bulletproof or you may lose in the future labor is definitely a safer option because a lot of stores if you don't complete the installment plans, they refund whatever you have paid with a very very small default fee that you have to pay to you enough to get to release your money but those structure you know by now pay later kind of thing you pay definitely higher fees if you cancel and it's going to hurt your credit score too. So yeah, right.
Emma Atkinson:
But the thing about layaway, right or at least in my experience is it's only really good for big purchases right like a fridge or a washing machine or like a brand new ebike or whatever but you can't just buy $200 worth of makeup and go to the store and say Hey, can I put this on a layaway plan? Right?
Ali Besharat:
Correct. And also, they're only available in the store, there is no online option. So most of us obviously spend quite a lot of money. And most of our shopping experience happens in online platforms, and E commerce websites. And they usually do not have that flexibility to have layover. So that's why the mechanism for buy now pay later emerge. And they're very successful, because that's the only way and if you look at it, there are usually two or three big players in that space. And their DAP instructor very similarly, they all are there to help the consumers and the merchants to move the products and help the customers to kind of make it more palatable in terms of the budget.
Melissa Akaka:
Especially if they have a high price point product and they don't have all the cash rate at that time, and they can spread out the payments for it over time, then it will probably incentivize them to buy more expensive things. I think the one thing about credit cards too, though, is if you are able to use them and pay off your balance on monthly, you can get a lot of benefits from using them a site that you wouldn't get if you were using like a buy now pay later type of program, right. So if you pay your credit card bill off monthly, then you can get things like points and miles and some of those types of cashback benefits and things. And so, again, back to the question, it really does depend on the financial literacy and capabilities of the jurisdiction.
Matt Meyer:
We're kind of getting into kind of some some nitty gritty details here. But are there differences between these these by now pay later companies like Klarna and affirm and do they operate a little bit differently despite being in the same space?
Ali Besharat:
Yeah, so in terms of structure, they're very similar to both of them offer for interest free payments, but current offers more payment options compared to a firm and both of them they do a soft poll for potential customers credit history, but they do not affect your credit score whatsoever. A firm does not charge late fee, but Klarna charges a late fee of $7, or up to 25% of the installment. And so if you want more flexibility Karnas option to go we could do that allows you to pay off that purchase up to 36 months. However, if you're more concerned about the late fees, firm is the way to go. And obviously there was no no charge for it for compared to Florida.
Emma Atkinson:
Okay, got it. And so you were saying that these are less likely to negatively affect your credit, right?
Ali Besharat:
No, they do. If you default, if you are late for the payment, or you do not pay the installment payments, then they're going to be reported, but they do not promote positive behavior, meaning that if you want to build a credit history, they do not help you to build a credit to credit card are the best mechanism to build a credit to this mechanism for payments, they do not help you build a credit for the good behavior, unfortunately, but they obviously penalize you for bad behavior. Does it make sense?
Matt Meyer:
Oh, yeah, we talked a little bit about the incentive to buy higher priced items you had mentioned that are there any kind of back end benefits these companies have for partnering with a buy now pay later company just from an operations standpoint?
Melissa Akaka:
probably that they don't have to manage the like the payback of the money, right, they have an organization that is providing that service for them and so they're probably the ones they're charging the money for us and like maybe having to even go collect their money at the end.
Ali Besharat:
Yeah, and also they kind of outsource the financing of their products so they don't have to have an internal department for financing all the purchases and offer financing options for consumers to purchase may seem out of reach. But with this mechanisms, obviously you kind of helped the products as I said more seem more affordable. And those mechanisms helped to move the product faster. But you know, they charged a merchant fee obviously and that's how they survived so there is like typical loan vending machines but so they make money on the late fees that they collect or on the installment plans if they stretch outside of the four installment payments but also discharge nurturance based on you know the purchases that consumers make them they could be commission based or percentage base or flat fee. Got it
Emma Atkinson:
so we're talking Buy now pay later we're talking layaway, we're talking credit cards has there been an uptick in people using this kind of buy now pay later structure you know, that goes for credit cards, buy now pay later and layaway? Is that something that we're seeing an increase in right now?
Ali Besharat:
Yeah, so I found that a lot of consumers are using the Buy Now pay later mechanism quite a lot more than even the credit cards especially for smaller purchases because credit cards usually come with bigger balances on a credit card especially if you have a good history you can buy major purchases with the credit card and get points back but for smaller purchases like small utilitarian orthodontic products, up to 3020 $500 a lot of consumers like it and even most of the E commerce even famous ecommerce platforms allow it to customers like it and budgeting for it is very difficult to do. So yeah. So definitely I don't have a lot of stats on it. Because again, each a different group of merchants or E commerce websites, we've worked with different platforms so and they don't publicly advertise you know how you're doing, honestly, but seeing that the positive trend, they show it in most of the E commerce websites that you have that option.
Matt Meyer:
So thanks for coming on Melissa and Ali and Happy Holidays and Happy gift giving.
Melissa Akaka:
Thanks for having us.
Ali Besharat:
Yeah, it was a pleasure. Thanks. That was awesome.
Emma Atkinson:
Thanks again to our guests, professors Melissa Akaka, and Ali Besharat. For more information on their work and the sources used in this episode, check out our show notes at du.edu/radioed. Tamara Chapman is our Managing Editor. Deborah Rocha is our production assistant James Swearingen arranged our theme. I'm Emma Atkinson…
Matt Meyer:
and I'm Matt Meyer …
Emma Atkinson:
and this is RadioEd.
