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Research suggests selling holiday products early benefits consumers

By Isabella Vesperini

Posted November 24, 2023

A generic photo of holiday decorations in a shopping mall.

Advanced selling has been traditionally applied to virtual products that do not require any storage space, such as tickets or vacation packages. (stevepb, Pixabay)

Recent research suggests selling holiday products in advance benefits manufacturers, retailers and consumers.

Krista Li, associate professor of marketing at the IU Kelley School of Business and co-author of the study, said advanced selling may lower retail prices. It also reduces the problem of double-marginalization (when a manufacturer and a competing retailer increase the prices of products). However, if prices continue to rise, consumers will be less willing to buy products and retailers and manufacturers will not make as much money. All parties involved lose.

“Advanced selling leads to a win-win-win outcome, it allows consumers to have the option to buy either early on or buy later during the season,” Li said. “Prices will be lower and consumers will buy more.”

Li said even if early selling forces manufacturers and retailers to lower prices and make less profit, it does allow them to coordinate the channel more efficiently and stimulates demand. Setting prices low early on also gives consumers an incentive to shop early. Advanced selling reduces demand later and, thus, lowers prices more.

“My research suggests that if consumers start to stockpile either because of anticipation of a future inflation, or because of other reasons, if they stockpile and purchase early, future demand will go down,” Li said. “That will help to slow down inflation, that will help to reduce future prices.”

Li said stockpiling products in store depends on the size of the product; the bigger a product is and the more space it takes, the more it will cost to store it in advance. It is also in the consumers’ interest to have smaller products.

“If it's harder to stockpile a product, it takes a lot of space, it takes a lot of fridge space, it's more costly to stockpile, and consumers will not buy too much of it,” Li said. “Our findings suggest that for products with low storage costs, that does not expire very quickly, very soon, or has an ingredient that can last for longer time, the benefit of an advanced selling is even higher.”

Li said advanced selling has been traditionally applied to virtual products that do not require any storage space, such as tickets or vacation packages.

“With retail products, it’s [advanced selling] definitely picking up in recent years,” Li said. “Because storage is a practical consideration, whether the manufacturer or retailer have a warehouse to stockpile their product to handle the distribution of the products, we can see it's more common nowadays for physical goods.”

Li said about a third of annual consumer purchases are spent on seasonal products.