Why the market for Christmas gifts is inefficient, and an actuary’s opinion on how we can improve it

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Christmas is upon us yet again. It’s the time of year for resting, eating and spending quality time with family and friends. It’s also the time of year where we brave shopping centres at their absolute busiest to try to purchase gifts for those same loved ones.

Personally, I have always found the process of purchasing gifts at Christmas annoying. Not only because it is quite a frustrating task at my favourite time of year, but mostly because I feel that how we go about purchasing gifts for one another is incredibly inefficient.

There are three main components to this inefficiency:

  • The person buying the gift is not the best placed person to make the decision

The Christmas gift market is massive. It results in billions being spent every year. And the gift beneficiary takes no part in the decision as to what gift to buy. Think about this for a second. If a company invests billions, they will make every effort to ensure that that money is invested as efficiently as possible. Research is done. In depth analysis is done. But when it comes to purchasing gifts, we leave the decision as to what to buy to someone who will always be second best at deciding on the gift. The opinion of the most important person in the gift decision process (the person who will receive the gift) is not taken into account.

  • The gift buying process is time consuming

We’ve all been there. Going to a mall in the build up to Christmas could reduce the Dalai Lama to a total rage. Picture the impossible-to-find parkings, the massive crowds and the long, snaking queues. The crowds at Christmas time can easily double how long it takes to do your shopping.

What about shopping online you say? Well, it is an improvement on physically going shopping. But in South Africa online shopping is not where it should be yet. The range of available items often isn’t as wide as it would be if you visited a shop. You also still need to decide what to buy, which for many is the most time consuming part of the process. And finally, if you’ve left your shopping to a week before Christmas (like I always do), it’s unlikely your gifts will arrive on time.

  • The expenses associated with purchasing gifts are unacceptably high

Think about what the average cost of a gift you purchase is. Say it’s R200. You now need to purchase both a card and wrapping paper for that gift, which could easily cost another R50. If this is your average gift, it means that 20% of your total Christmas spend is not on the actual gift. Put another way, if we didn’t have to purchase cards and wrapping paper, we could spend probably 25% more on our loved ones than we do currently.

I would propose the following improved method for purchasing Christmas gifts:

All Christmas gifts are monetary. We decide how much we want to spend on everyone for Christmas, and we transfer those amounts to those people on Christmas day. People can then use that money to buy their own gifts. This ensures that the final gifts are a better fit to the beneficiary. Secondly, all the admin of purchasing a gift is removed from the giver. Finally, by not having to purchase cards and wrapping paper the total spend remains the same, while the total value of gifts received increases. A heartfelt message can still be sent via email.

A secondary benefit of this process is that you will require someone’s banking details before Christmas day if you want to give them something. Gone are the awkward times where you are surprised by a gift from someone where you haven’t bought them something in return.

In case it wasn’t obvious, this article is written with tongue firmly in cheek. I am off to Gateway Shopping Centre tomorrow on 24 December to buy my family gifts. Wish me luck!

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