Perception Of ‘Free’ Motivates Tax Holiday Crush
BOSTON — Projecting five times the earnings of a normal August weekend, Massachusetts retailers are counting on this weekend’s sales tax holiday, happening Saturday and Sunday.
But why does saving 6.25 percent have such a stimulative effect and lead consumers to stores in droves? After all, on certain new iPods, for example, the sales-tax savings are less than $10.
Andrew Ailsworth, a professor of marketing at Bentley University, says it has more to do with consumer perception that actual dollars and cents.
“I think people imagine that they’re getting better deals than they’re actually getting,” Ailsworth said. “When people hear sales tax holiday, they might not consciously think, ‘Oh well, I’m saving 6.25 percent.’ They just think, ‘Whoa, deal, I’m getting something for free.’ And that something gets bigger in their head than it actually is.”
For Ailsworth, “free” is the “magic word” that motivates consumer drive, though he says another word, “holiday,” promotes a celebratory feel to the statewide sale.
He also says some buyers may see it as a chance to get back at government taxation.
“The government’s taking money out of my paycheck every week,” Ailsworth said. “They’re taking money at the gas pump, they’re taking money everywhere else. Now I’m gonna get this iPod and the government’s not getting squat from it. Ha!”
While consumer motivations may vary, Ailsworth says retailers welcome the holiday’s promotional benefits.
“Any time you can build traffic at a retailer — for any reason — to get people in your store looking at stuff, I think that’s a good thing,” he said. “You never know what they’re going to buy.”
Jon Hurst, of the Retailers Association of Massachusetts, says that increase in traffic leads to a boost in competition among retailers.
“The question is, are they going to be coming out to your store versus your competitor? You’re seeing a lot of promotion, a lot of advertising,” Hurst said. “Consumers are going to be doing a lot of comparison shopping, just as they do in December for holiday shopping.”
The Saturday and Sunday sales tax holiday does not include items costing more than $2,500, and taxes are still levied on cars, boats, meals and tobacco.