Will the Post-Pandemic “Revenge Shopping” Surge Save Retailers?
- Revenge shopping—a surge in spending as consumers make up for shopping time lost due to Covid-19—may or may not happen as pandemic restrictions ease.
- Many merchants are hoping for (or counting on) this phenomenon to put them back into the black.
- Revenge shopping could be a lifeline to struggling retailers but also opens them up to a wave of “buyer’s remorse” chargebacks.
“Revenge Shopping.” It sounds passive-aggressive, like someone getting payback by going on a shopping spree using their ex-partner’s credit card. In this case, however, the object of revenge is not a person. It’s Covid-19.
What is Revenge Shopping?
- Revenge Shopping
Revenge shopping is phenomenon involving consumers who feel deprived of certain items or experiences, and who therefore spend more money on these items and experiences when given the chance to do so.
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Of course, we’re not talking about literal revenge here. The "revenge" in question is more of an irrational overcompensation for something, like being shut out of your favorite mall for a year. Economists predict that shoppers are itching to make up for lost time and that they’ll increase their discretionary purchasing over the coming months in response.
The idea is supported by a recent report from McKinsey which suggests the relief consumers have after surviving the crisis will gradually lead to looser purse strings. It’s retail therapy, and it will boost overall consumer confidence, providing the economy an additional boost…at least in theory.
How Revenge Shopping Could Help the Economy
|During the pandemic, uncertainty curbed spending.||As restrictions ease, pent-up demand leads consumers to go on shopping sprees.||Influx of revenue increases consumer confidence, leading to higher overall sales.|
Revenge shopping is the catalyst. As the pandemic winds down, we’re likely to see more and more consumers showing off all the designer clothes, latest electronic toys, and name-brand accessories they denied themselves during the lockdown. In fact, many retailers are counting on this surge in spending. They hope this pent-up demand will be the lifeline that keeps their businesses afloat.
There are two problems with this scenario, however. First, there’s the possibility that revenge-shopping mania might not happen. Second, the more revenge shopping people do, the more friendly fraud chargebacks we can expect to see.
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Different Markets, Different Expectations
Revenge spending may be a trending topic online, but the view from the trenches isn’t so definitive. Around the world, the response to the pandemic varied from continent to continent. It’s no surprise that recoveries would differ as well.
For example, consumers in China seemed to be demonstrating more confidence at first. According to luxury trade news outlet The Diamond Loupe, Chinese consumers “… are now flush with cash and a desire to regain a ‘real life'.”
That was back in March; months later, the tsunami of consumer spending they predicted has yet to happen. There was a bump in post-pandemic shopping, of course, but overall, the predictions proved to be highly optimistic. In fact, while the country was one of the first to emerge from lockdown, China is now facing a severe economic downturn.
Meanwhile, US retail has been a mixed bag. On the one hand, the market has been slower to recover, leading to decreases in US small business revenue well into 2021. At the same time, there are some significant signs of recovery.
With stimulus checks and vaccination cards in hand, a larger-than-expected percentage of US consumers spent their last round of government assistance on bigger-ticket items like electronics, vacations, and home improvement. It’s almost as if they were rewarding themselves; sales in US department stores jumped over 20% as a result of the third stimulus package.
The bottom line: as merchants start to dream of a life beyond quarantine, there is reason to be cautiously optimistic. A business-saving flurry of customers and explosive sales numbers, however, may not happen.
Another Worry: Chargebacks
How much revenge shopping we’ll experience over the next few months remains to be seen. While most merchants would probably take any uptick in sales, revenge shopping may be a double-edged sword. Surges in spending, especially in the card-not-present space, are almost always accompanied by increased fraud.
Criminals see a dramatic increase in your sales activity as an opportunity. They know you’re less able to devote your full attention to fraud management, which makes it the perfect time to strike. This is not confined to the pandemic; it’s something we see every year around the holidays, for example.
There’s another fraud risk that can be amplified even further by revenge shopping, too. This particular kind of friendly fraud is called buyer’s remorse.
Criminal fraud, meaning any situation in which fraudsters attempt to make unauthorized purchases using a legitimate cardholder’s information, is a serious threat. It should not be taken lightly. That said, not all fraud comes from deliberate bad actors. Buyer’s remorse is a perfect example of fraud that might be unintentional but will impact your bottom line regardless.
It’s not uncommon for shoppers to buy an item on impulse. But, while a customer may regret impulsively purchasing a $2 bag of M&Ms, in the end, it’s not a big deal. On the other hand, if the impulse purchase is a $2000 television, the situation is different. The cardholder may enjoy the TV, but later realize that they can’t really afford it. Revenge shopping is the perfect set-up for this to happen.
We mentioned earlier that revenge shopping could be described as an irrational overcompensation for something—the keyword being “irrational.” Revenge shopping by definition involves making purchases without thinking through the potential consequences.
When rationality returns, regret kicks in. Unfortunately, that may not happen for weeks—often long past the time limit stated in your returns policy. Feeling they have no other option, the customer calls the bank and files a chargeback.
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The Tip of the Iceberg
Customers are entitled to a chargeback in the event of criminal fraud. In fact, chargebacks were originally created as a way to protect consumers against such crimes. They still fill that role, but chargebacks filed over buyer’s remorse fall into the “friendly fraud” category.
Customers can have up to 120 days after a transaction to file a chargeback. That means if there is a large amount of revenge shopping, much of the money you believed you made could disappear from your account months later.
As bad as it is, buyer’s remorse is just one of several scenarios falling under the “friendly fraud” umbrella. Customers may simply not recognize a purchase or deny a purchase made by a family member.
Buyers may also mistakenly believe that a chargeback is the same thing as a refund. For the record, this is untrue; when we consider chargeback vs. refund procedures, the chargeback can cause a lot more damage to your business. Even worse, a cardholder might file a chargeback intentionally to try to get something for free (a practice called "cyber shoplifting").
After a year of pandemic pandemonium, customers are making their way back into stores. This is likely to continue well into the holiday shopping season. That means now is the time to take steps to stop chargebacks that could stem from revenge shopping.
The experts at Chargebacks911 can help you discover the true sources of your chargebacks and implement an end-to-end management strategy to recover revenue and prevent future chargebacks. Contact us today to learn more.
What is revenge shopping?
In this case, Revenge shopping consumers are frustrated at the circumstances (the pandemic) that have unfairly kept them away from the mall for the last 18 months. Customers feel justified going on a shopping spree to make up for lost time.
Is revenge shopping a good thing for merchants?
If consumers are simply making purchases they would have made anyway, but delayed due to the pandemic … then yes, it can be a very good thing for merchants. Retailers have the opportunity to recoup at least some of the revenue they’ve lost over the last few months.
Can revenge shopping a bad thing for merchants?
In some instances, consumers aren’t making delayed purchases so much as impulsively shopping for the sake of shopping. If they end up overspending, buyer’s remorse could set in. This would lead to a rash of chargebacks.