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Satisfaction often lacking in gift giving, says professor

Local shoppers ask first, then buy

Satisfaction often lacking in gift giving, says professor

Target customers Melissa Sanchez and Jose Pena braved long lines on Friday as cashier Amber Armstrong worked diligently to keep customers moving and happy.


POSTED December 23, 2011 5:41 p.m.

Buying the perfect gift isn’t just a challenge to holiday shoppers across the country – it’s also an intriguing question for economists.

When shoppers buy gifts for others, they oftentimes buy the wrong thing, leading to a $14 billion annual hit in “wasted” money, according to Joel Waldfogel, University of Minnesota, Carlson School professor of economics and author of the book “Scroogenomics.”

“The problem, generically, is that when one is compelled to do a lot of spending without knowing what people want, it can be inefficient,” Waldfogel said.

From an economist’s perspective, generally buyers will only pay $100 for an item if it’s worth $100 to them. Essentially, $100 spent creates $100 worth of self-satisfaction.

But in gift giving, buyers spend $100 and oftentimes don’t know exactly what a recipient wants. The recipient could value the item at $50, or perhaps would never buy it, leading to inefficient expenditures.

Per Waldfogel’s research, Americans spend about $70 billion on Christmas shopping – about half the worldwide, $140 billion total. Recipients generally value items at only 80 percent of the purchase’s true price, according to Waldfogel’s surveys, creating as much as $14 billion in wasted or missing satisfaction.

The lesson isn’t that gift giving should cease, Waldfogel says, but that gift givers should be cognizant of their giftees’ wants and needs.

“The question is, is there a way to preserve those good feelings, but also get some items that recipients actually want?” Waldfogel said. “... Spending in itself isn’t bad, but spending should be productive.”

In some cases, gift giving tends to be more efficient than others. Waldfogel found that those purchasing for others in close relationships – spouses, significant others, parents, children, and siblings – are more successful in purchasing gifts valued highly by recipients. More distant relatives – aunts, uncles, cousins, and grandparents – are less successful, not because they are bad gift givers, but because they are often unaware of wants and needs.

"This makes sense, these are people who are together quite often, they know what each other want,” Waldfogel said. “ ... It's those situations where the giver is not in frequent contact with the recipient where we see decisions made that tend to miss the mark quite significantly."

For Turlockers out doing some last-minute shopping on Friday, news of Waldfogel’s research was unsurprising; most seemed aware of the need to purchase gifts which recipients would value.

Rather than taking a shot in the dark, Turlock shoppers will usually ask their giftees for hints and wishlists.

“I don’t even beat around the bush,” said Pamela Pires of Hilmar. “I ask them what they could need or use.”

Iva Kringle, of Turlock, goes a step farther. In addition to asking for gift ideas, this year she brought her daughter with her to the store to aide in shopping. That way, she can be certain gifts for her grandchildren will be appreciated.

JoJo Summerton, of Atwater, and Monica McClure, of Turlock, also seek out gift ideas to ensure presents are what giftees truly want. But if that special item can’t be found, Summerton and McClure turn to gift cards.

“If we can’t find what they want, they get a gift card,” McClure said.

The gift card industry now accounts for $80 billion in sales nationwide each year – more than the Christmas surge. Those little plastic cards account for nearly one-third of all holiday gift giving, and are universally ranked among the most desired gifts.

The demand comes as no surprise to Waldfogel, who endorses gift cards as a highly efficient gift.

“They are highly appreciated by recipients, and more importantly for me, they give the ultimate choice over what the recipient is going to get,” Waldfogel said. “We get around the problem of someone else choosing for you.”

Ideally, cash would be the best gift, Waldfogel said, as it allows giftees to buy whatever they truly desire. But due to stigmas cash is seldom gifted, leaving the more socially acceptable gift cards as an intriguing solution, Waldfogel said.

Romana Downer, of Turlock, said she turned to gift cards this year when purchasing for her daughter.

“I didn’t want to give her cash, so I gave her a gift card,” Downer said.

Of course, there’s always room for another tactic when it comes to holiday gift giving. Just ask Al Edgmon, of Hilmar.

“I try to stay out of it and let my wife do everything,” Edgmon said.

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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