The truth about retail therapy: if money is tight it won’t make you as happy as you think it will
- Can money buy happiness? People with limited resources or under financial stress get less satisfaction out of treating themselves, a study shows
- They may revisit their purchase and think about what else they could have done with that money, say researchers
If you need a boost and think buying yourself a treat will make you feel better – some so-called “retail therapy” – then think again. New research shows people derive less “purchase happiness” when they feel financial stress and they also leave worse reviews.
The study by Duke University in the United States looked at all income levels and its findings were consistent across the board. Whether people bought a material object or an experience, those who perceived themselves to have financial pressure experienced less satisfaction from the purchase. This ranged from purchases costing from US$100 up to US$1,000.
“People who are financially constrained are more likely to buy things to improve their happiness, but our research shows what happens is precisely the opposite,” said researcher Rodrigo Dias.
The findings, which attempt to answer some of the questions around the link between wealth and happiness, have been published in the Journal of Consumer Research.
China currently ranks fairly average in the world’s happiness league table. According to the United Nations World Happiness Report, between 2013 and 2020 the average happiness rating in China was 5.34 out of 10. This was slightly below the world average of 5.51. China ranked 92 out of 150 countries, with Finland, Denmark and other European countries taking the top spots.
Despite China’s economic growth in recent decades, perceived happiness ratings are far lower than they were in the 1990s when the World Values Survey recorded an average of 7.3 out of 10.
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“People at all income levels are feeling financial pressure, particularly right now,” while we’re still battling the Covid-19 pandemic, said Duke University researcher Gavan Fitzsimons.
“That feeling of financial constraint leads people to revisit their purchase and think about what else they could have done with that money, also known as the opportunity cost,” he explained.
“Because of that question in a consumer’s mind about what else they could have used the money for, every time they think about that purchase they are going to be a little less happy with what they did end up buying,” he added.
Feeling financially constrained refers to a person’s perceptions about their financial situation and affects people of all socioeconomic circumstances, the authors said.
Being a cash-strapped consumer impacts more than just a person’s “purchase happiness”. It could also impact a company’s sales, as several studies in the research showed that financially constrained consumers leave worse reviews.
The researchers analysed online reviews from the website Yelp for the 15 largest restaurant chains across the US, examining data for more than 850 eateries in 15 big cities. Next, they used US survey data to identify postcodes in which people reported financial stress.
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They found that people who visited restaurants in postcodes where residents felt more financial stress also wrote worse reviews, said research co-author Dias.
Rising costs because of inflation and other pandemic-related factors suggest consumers may face even more financial stress in the coming months.
This added financial pressure could compel more “compensatory consumption”, or the act of buying things not solely for their function or purpose but because the buyer believes the item will compensate for a deficit in another area of their life – popularly known as “retail therapy”.
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But there is a solution. The authors discovered at least one way financially constrained consumers could get more happiness from their purchases: through detailed planning.
“If people who feel financially constrained make a more conscious decision about their purchase and plan in advance as opposed to buying an item on the spot without forethought, they are already thinking through the possible alternatives for how they could have spent that money,” Fitzsimons said.
“That helps them get more happiness from their purchase than they otherwise would have. Are they as happy as they would be if they weren’t financially constrained? Not quite. But having people plan and think ahead about how to spend that money can help them derive more happiness from their purchases.”
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Measuring consumers’ “purchase happiness” is just one new way scientists are attempting to resolve a perennial question about the relationship between wealth and well-being: can money buy happiness?
“Social scientists have long known that having less money is associated with lower well-being, at least to some extent. Our results suggest that having limited financial resources hampers well-being not only by restricting what people can buy, but also by reducing the happiness they get out of their purchases,” said Dias.
