Online shopping is getting more and more streamlined as technology grows. But is that a good thing?
American Express recently partnered with Twitter to launch Amex Sync, which lets users store their credit-card information online and buy promoted products instantly by tweeting special hashtags.
After a successful limited launch last March, the credit-card company brought out an expanded version for 2013, enabling users to buy promoted items from Amazon, Sony, Xbox, and others with a single tweet.
Such purchasing ease is great for retailers and convenient for consumers – perhaps too convenient, experts warn. As one-touch purchasing expands, retailers may be making it too easy for people to shop, boosting impulse buying and overspending. For incautious consumers, it could be financially dangerous.
"It can be a tricky way to pay," says Farnoosh Torabi, a personal finance coach and host of the "Financially Fit" Web series on Yahoo. "Money is abstract as it is, and it's why a lot of us have a hard time managing it. If you have to see money leave your wallet, overspending is harder. But with things like Google Wallet, it's very easy, a lot quicker. And we already tend to overspend with credit cards."
Online 'wallets' speed purchases
Online retailers have been streamlining purchases for years. What began with one-click purchasing on iTunes and Amazon has expanded to payment platforms with multiple retailers. Google Wallet lets users make online and in-store purchases with the click of a button or the wave of a phone at participating merchants. Visa has V.me, a Pay-Pal-like service that allies with banks to sync major credit cards (MasterCard, American Express, and Discover) to an ever-growing list of stores. MasterCard is planning its own virtual wallet.
"Where V.me is accepted, you'll never have to enter your card number or shipping preferences again," the website boasts.
The move to Twitter is the latest move in this expansion. So far, Amex Sync is limited to special promotions – the Twitter equivalent of flash sales. But the technology could lead to more.
"The underlying capability of using Card Sync to make purchases could translate across a variety of platforms, partners, and markets," American Express spokesman Bradley Minor writes via e-mail. "We wanted to bring this new experience to Twitter first because we think this is the most dramatic manifestation of what our technology can do."
The advent of smart phones has also increased the efficiency of purchasing. Not long ago, shoppers had to sit at their computers to shop online, but now, "more people have access via smart phones and tablets," says Chris Christopher, an economist with IHS Global Insight based in Lexington, Mass.
As purchasing becomes faster, online sales rise. In 2012, e-commerce retail sales increased 16 percent from 2011, to $225.5 billion, according to IHS Global Insight, while bricks-and-mortar store sales increased only 5 percent in 2012.
"The clicks are outpacing the bricks by a strong margin and gaining share on overall retail," Mr. Christopher says by phone. "Retail trade overall is not doing that great, but e-commerce is."
The access can be a mixed blessing for consumers.
"Changing the environment to be so frictionless can make the money nonapparent," says Dan Ariely, a professor of behavioral economics at Duke University in Durham, N.C., and the author of "Predictably Irrational: The Hidden Forces That Shape Our Decisions." At least "when you [enter credit-card information], you think about the money you are giving up."
The Twitter connection is even more problematic, because it occurs outside a traditional shopping venue and in an environment that encourages instantaneous expression of thought and emotions, according to Ms. Torabi. "If emotions are high, things can get out of hand very easily," she says, noting that users are constantly getting into trouble for hastily writing tweets they later regret. "As a financial coach, I wouldn't recommend this."
Rules for consumers
But a more user-friendly shopping environment has its upsides, too. It clears any obstacles to helpful purchases and aids the impulse to do good things online, like giving to charity.
To maximize the benefits while minimizing the risk of getting into financial trouble, Torabi recommends a few guidelines: Avoid items with a limited availability that are associated with a window of opportunity – coupons on Groupon, or "flash sales" on sites like gilt.com. "Don't fall for the marketing gimmick of 'you must act now.' You can act whenever," she says.
Second, create a decisionmaking process for yourself that involves reflecting on a purchase before pulling the trigger. Bookmark an item online and come back to it in an hour, or call up a friend to talk about it. Read the fine print: Many applications, for instance, come with annual service fees. What's worse, you can't return them.
Third, fight fire with fire: Arm yourself with tools to make checking your finances easier and more automatic. Download a mobile banking app and monitor it. "If you know you only have $50 left in your savings account for the month, you're probably going to hold off on making that purchase until next month," Torabi says.