Just last week, I had a conversation about leggings that blew my mind. After receiving an invite to an online LuLaRoe party, I asked the host how the whole thing worked.
She said I just needed to join the Facebook group and then bid on the leggings I wanted. Simple enough, right? Funny thing is, the party also included a second component I couldn’t quite figure out – a competitive bidding process over special leggings known as “unicorns.”
Now, I’m not an expert, but here’s what I recently discovered: Some LuLaRoe leggings are called “unicorns” because they’re rare. Some of these leggings have actual unicorns on them, while others simply have popular patterns that devoted consumers apparently crave.
They crave these patterns so much, in fact, that they’re willing to get into bidding wars on Facebook to secure a pair. Upon learning these details, I burst into hysterical laughter. By myself. In my living room. Envisioning grown women bidding crazy amounts on “rare” leggings sounded especially funny for some reason.
Unfortunately, I quit laughing after Googling “LulaRoe unicorns for sale.” Across websites like PoshMark, eBay, and Etsy.com, people were selling these babies for $70 or more!
Scarcity Marketing, and Why it Works
While this all sounded crazy to me, it only took me a moment to realize the genius behind this strategy – and what I was witnessing. Scarcity marketing is a clever tactic employed by companies everywhere, spanning nearly every industry that sells services or retail goods.
The concept behind this marketing ploy is a simple, manipulative twist on supply and demand: Limit quantities of whatever you’re selling to generate a forced scarcity, thereby creating a perception that it’s rare or valuable. Once consumers have bought in, you can jack up the price – and the profits – as long as you’re careful not to flood the market.
“Scarcity is often used to bolster sales, but it can also be used to create massive brand lift,” writes Sujan Patel in Forbes. “It plays on the customer’s fear of missing out.”
Promotions like daily deals, product limitations, and one-time only sales create a sense of urgency and leverage scarcity, he explains. Promoting some items as “out of stock” is another way to show scarcity, mostly because it shows consumers your product was so popular it sold out. Examples of creating scarcity he offers include:
- Amazon Fire TVs running out of stock within a week after launch
- Nintendo shorted the production of the Wii game console
- Apple delayed shipping by two weeks or more on the iPhone 5 just minutes after it launched
Some of this might be due to poor planning in supply and demand, notes Patel, but it makes you wonder how companies use this tactic to their advantage.
The Way Scarcity Marketing Affects the Way We Shop
The reality is, most of us encounter scarcity marketing nearly every day. Tell me, when’s the last time you read or hear something like:
“Only X left then they’re gone for good!”
“Offer available for a limited time only!”
“This event will sell out fast!”
“These are the lowest prices of the year!”
Heck, half of my kids’ toys use scarcity marketing as their main marketing ploy. The tiny toasters, blenders, and cupcakes known as Shopkins are the best example I can think of. These miniature toys use packaging that disguises half of the Shopkins you’re actually buying, creating an element of surprise kids love. On top of that, Shopkins creators Moose Toys labels the miniatures with terms like “rare” and “ultra rare” to add another layer of mystique. The goal, of course, is to convince consumers to spend more of their money in pursuit of these scarce finds.
It’s not always an intentional marketing strategy — but a limited supply can sure fan the flames of a nascent fad. At this exact moment, parents all over the country are also scrambling to find a new toy called Hatchimals. These stuffed animals that kids can coax into hatching from an egg were in stock as of late October, but they’ve become the “it” toy for the holidays, and they’re all but gone now. A message on the Hatchimals website explains it all:
“The consumer response to Hatchimals has been extraordinary, exceeding all expectations. Some of our first shipments have already sold out. While additional product will hit retail shelves in November, we anticipate this inventory will also sell out quickly. We have increased production and a whole new batch of Hatchimals will be ready to hatch in early 2017. This is a special season and we don’t want anyone to be disappointed, nor do we support inflated prices from non-authorized resellers. We are working on creative solutions to help kids and their parents withstand the wait. In the interim, some retailers are developing pre-sale and/or rain-check programs for redemption in January.”
If you want one bad enough, though, you can pony up $150 or more to buy Hatchimals on eBay – that would have retailed for about $50 otherwise. The worst part is, parents are the ones feeding this frenzy, not kids. “It’s a craze fueled by competitiveness — parental competition,” consumer psychologist Kit Yarrow tells Money. “It’s not about the product, it’s about winning and obsessiveness.”
Of course, scarcity among kids’ toys is nothing new. In the 1980s, parents practically stormed the stores to get their hands on Cabbage Patch Kids. And old “Today Show” clip shows newscasters explaining the phenomenon, describing lines that were hours long, fights breaking out in the aisles, and parents bribing store managers to be first in line for a new doll.
Why the craze? Because Cabbage Patch Kids were released in limited numbers, and mostly individualized with their own name, look, and birth certificate. It all worked similarly to the LuLaRoe leggings and Shopkins of today. Make something artificially scarce and “special,” and people will line up in droves to buy it. They always have, and perhaps they always will.
The Bottom Line
The fact that retailers want us to spend more on regular stuff that’s purposely made “scarce” is a given, but that doesn’t mean we have to buy into it. Just like anything else, we have the power to decide how we spend our hard-earned dollars, and whether rare leggings, toys, or electronics are worth the splurge.
The best way to avoid overspending for items that aren’t really better, I think, is to spot scarcity marketing and avoid it. It all boils down to the reality of your spending. Do you or your kids want the item because of what it does, or what it represents? Are you buying something because you want or need it, or because you’re scared you’ll miss out? It’s like when you walk into Kohl’s and see that nearly everything is 50% off. But if you save 50% on something you didn’t need in the first place, you didn’t really save anything.
The next time you get pulled into a last-minute deal or a special sale, ask yourself if the item is even worth it. Are you spending more out of a sense of urgency, or could you wait and find a better deal later? And if you find yourself getting ready to pay $70 for a pair of leggings, shut down your computer… and walk away.
- The Elves in the Attic: Making Old Toys New Again
- Kids, Christmas, and Frugality
- The Best and Worst Retail Price-Matching Policies for Holiday Shopping
Have you ever bought into scarcity marketing? How do you spot scarcity marketing and avoid it?
Holly Johnson is an award-winning personal finance writer who is obsessed with frugality, budgeting, and travel. She blogs at ClubThrifty.com and teaches others how to write online at EarnMoreWriting.com.