The inefficiencies of Christmas – The Economist

by | Dec 20, 2022 | Financial

‘Tis the season to be jolly—and to feign delight at disappointing Christmas presents. The average British adult splurged around £550 ($667) on gifts in 2021, according to one survey. But a back-of-the-envelope calculation by Ian Stewart of Deloitte, a consultancy, suggests that the volumes of unwanted stuff in effect destroyed around £3bn of the £25bn value. Though many see Christmas as a time of generosity and cheer, others see waste. A small number study its inefficiencies. Listen to this story. Enjoy more audio and podcasts on iOS or Android.Your browser does not support the element.Listen to this storySave time by listening to our audio articles as you multitaskOKIn 1993 Joel Waldfogel of the University of Minnesota identified a “deadweight loss” when he studied the difference between the cost of seasonal gifts and how much their recipients valued them after they had accounted for exchanges and put sentimental value aside. Today he says that on average cash spent on another person yields around 85% of the benefit of cash they spend on themselves. Although gift-giving may make some people happy, it’s “a lousy way to allocate resources,” he says.There are ways to reduce Christmas losses. One is the use of gift cards, which give recipients some choice. But Britons don’t seem to like them much. A survey of adults from Ipsos, a pollster, found that 43% of Americans, 40% of the French and only 29% of Britons were planning to give them for Christmas 2022. Making it easier to return unwanted gifts should help. Al Gerrie, chief executive officer of ZigZag, a returns platform, says that when a gift message or gift wrap is used in fashion retail (that is, for a present) return rates tend to be considerably higher. As e-commerce has expanded, so too have ways of sending stuff back. But returns are a headache for retailers. On average it costs between £5 and £10 to put a product back on the shelves, says Mr Gerrie, thanks to the shipping, inspecting and repackaging required. (In January, Father Christmas’s elves must conduct “sniff tests” to see if a garment has been worn.) Increasingly, retailers are charging shoppers to return goods. ZigZag’s data suggest the number of paid-for returns has more than doubled since last year, while the number of free returns has fallen. That, though, may mean more consumers are stuck with unwanted gifts. Another Christmas inefficiency for retailers is the fact tha …

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