According to the National Retail Federation, the average Valentine's Day gift costs $116.21 for a total of approximately $16 billion. Men spend an average of $158.71 while women spend an average of $75.79. Recipients of male generosity value these gifts at $28.86 less than their costs while recipients of female generosity value their gifts at $13.78 less than their costs. Based upon the average loss in utility, this represents a net destruction of utility around $2.9 billion nationally. Exacerbating the dire situation, Valentine's Day inflation has been rampant, rising over 12% Y/Y.
A significant part of this cost is in fresh flowers; prices average $60 for a dozen long-stemmed roses with more elaborate arrangements passing $100. This is a time of year with constrained capacity and white hot demand. What is the rational reaction?
First off, double check that one's Valentine actually likes roses. One might get as much credit for accuracy and for profligacy in gift giving and, at the same time, capture significant savings if someone prefers daisies or so forth. But, presupposing that someone wants roses, buy them on the day after Valentine's Day. Costco (NASDAQ:COST) and most grocery stores offer unbelievable sales the morning after Valentine's. Conservatively, you should be able to purchase them at a 50% discount. Even if the recipient values them at the average $10.91 discount to the full price, you are still paying only 61% of the recipient's gross utility.
For further reading on rational holidays, you might enjoy reading Scroogenomics: Why You Shouldn't Buy Presents for the Holidays (potentially as you drift off to sleep alone on the sofa on Thursday evening, if your plan is misunderstood).
When we buy for ourselves, every dollar we spend produces at least a dollar in satisfaction, because we shop carefully and purchase items that are worth more than they cost. Gift giving is different. We make less-informed choices, max out on credit to buy gifts worth less than the money spent, and leave recipients less than satisfied, creating what Waldfogel calls "deadweight loss." Waldfogel indicates that this waste isn't confined to Americans--most major economies share in this orgy of wealth destruction. While recognizing the difficulties of altering current trends, Waldfogel offers viable gift-giving alternatives.
By reprioritizing our gift-giving habits, Scroogenomics proves that we can still maintain the economy without gouging our wallets, and reclaim the true spirit of the holiday season.
Disclosure: I am long COST.
Additional disclosure: My long-suffering wife puts up with this kind of thing. She knows that she has lifetime tenure as no one else would be as understanding. Unless you are very careful, don’t try this at home.