Commerce Task 1: Consumer & Financial Decisions

·       A consumer is someone who purchases goods and services to satisfy their needs & wants

·       Goods are physical things

·       Services are things that one person will do for someone in return for payment

·       Durable good – can be used multiple times

·       Non durable good – can be used only once

Key factors affecting consumer & financial decisions

Customer Service

·       Good pre-sale and after sale service makes you (the customer) feel valued. Thus you will want to keep buying products from that store

·       Poor service will have an opposing effect

Price

·       If a price of a good is more than you can afford, you will most likely not buy it

·       Consumers what to get the best value (thus the implementation of a per unit price by the Competition and Consumer Act 2010

Convenience

·       Many customers don’t have lots of time to shop, the want it to be quick and hassle-free

·       Factors such as travel time, no. of stores or nowadays if a business has shopping online

Marketing & Advertising

·       If a marketing campaign is successful, consumers will be influenced into thinking they need this product

·       The average consumer is exposed to over 500 marketing strategies daily

Gender

·       Males and females have a number of common wants however a persons gender influences some types of purchases

Age

·       Our wants change over times

·       Babies want toys, teens want a phones, 18 yr olds want a car

            Disposable income

·       Disposable income refers to the amount of money that can be spent after income taxes

·       Higher disposable income = More spent on luxury items and holidays

Environmental Considerations

·       With increased awareness of environmental pollution, many consumers are becoming more aware of the problems of packaging

·       Thus you may be influenced to purchase a product that has minimal packaging

Social Media

·       Influencers online are people with large online audiences who post regularly promoting products

·       The content they post often influences their followers purchasing decisions

Cultural factors

·       Cultural factors are the set of basic values, perceptions, wants and behaviours of a particular community or group of individuals

How individuals make particular decisions

·       The basic financial decisions consumers need to make is how much of their income to save and how much to spend

·       This is called a budget – a financial plan

            Comparison shopping

·       Most goods and services are available at more than one retailer. Identical goods and services can be offered for sale at vastly different prices from different retailers.

·       Comparison shopping – shopping around to find the best prices

·       E-commerce has made online shopping a lots easier – you can quickly compare prices for a variety of products from online stores around the world

·       Impulse buying – buying something on a whim, in the spur of the moment, without considerations of other options

·       Planned buying – buying goods or services when all options have been considered; often to fulfill a need (could be a want)

Choosing where to buy

Sources

·       Distribution chain

1.       Manufacturers price – The price at which wholesalers purchase products

2.      Wholesale price – The price which retailers purchase products

3.      Recommended Retail Price – Normal selling price: The price which manufacturers and/or wholesalers suggest the retailer sells the product

4.     Discount price – Any price below the recommended retail price

·       In summary, as a product moves through the distributive chain the seller needs to make a profit by selling the product at a higher price then it was bought at

Locations

·       With developments in transportation and technology, consumers have been provided with a wide range of locations and sources from which to purchase a product

Mail order

·       A system in which the consumer completes and posts an order from (usually from a magazine or catalogue), receiving product through mail

ADVANTAGES

·       Greater range of products then found in a retail store

·       Convenience for the disabled or those with less means to get around

DISADVANTAGES

·       Losing money if a business doesn’t send the product

·       Products appearing different in reality

·       Problems tracing a business that uses only a post office box number if you want a refund

          Online Shopping

ADVANTAGES

·       An increase in range of sources available

·       Easier to do comparison shopping and faster

·       Relatively quick delivery times even from overseas sites

DISADVANTAGES

·       A website might not be permanent and tracing the owner if anything goes wrong could be impossible

·       Added delivery fee

·       Harder to return products

·       Risky to supply credit card details

·       The increase in scams and internet fraud

Types of retail outlets

Convenience ‘corner’ store

·       They are now commonly attached to gas stations

·       They sell a variety of products (food, magazines, newspapers etc.)

·       Usually higher prices than super markers but are convenient

Speciality stores

·       Specialise in 1 type of service or a limited range of a few products

·       Main advantage is the knowledge of the staff and the service

Discount variety stores

·       Plain w. basic customer service

·       Kmart & Target are examples

·       They usually attract a large number of customers because of their convenience, large range and cheaper prices

Factory Outlets

·       Near the factory where the goods were manufactured

·       Goods are normally cheaper as they aren’t given to wholesalers

Department Stores

·       Myer and David Jones

·       Sell large range of products

·       Cheaper then speciality (bulk buying) but more expensive then discount variety stores (more customer service)

Supermarkets

·       Large self-serve stores such as Coles and Woolworths

·       They are transitioning to become like discount variety stores selling a larger range of products

Location

Locally

·       The local convenience store with other stores will be frequently used by consumers who live nearby.

·       These stores are convenient for people travelling to and from school or to work because of it’s location

·       For a larger variety of goods, they will need to go to a regional centre

Regionally

·       Department stores, discount stores and supermarkets are often located in shopping complexes such as Westfield shopping malls.

·       Customers from the surrounding region travel to these complexes

Interstate or globally

·       Technology has allowed us to shop from another state or country

·       Consumers in search of a specific item, cheaper price or greater variety will often look in the global marketplace

Different payment methods

Cash

Definition: The money issued by the federal government

Advantages

·       Accepted almost everywhere

·       Some stores offer cash discounts

·       No hidden cost

·       Reduced risk of getting into debt

Disadvantages

·       Easily lost or stolen

·       Not safe to carry in bulk

Credit

Defenition: The supply of money now in return for the promise of paying it back later

             Advantages

·       Convenient for online and in-store purchases
Helps build a credit history

·        Provides security and fraud protection

·       Some offer rewards and cashback benefits

Disadvantages

·       Easy to overspend and accumulate debt

·       Can have high interest rates if not paid in full

·        Late payments damage credit score

Store credit

Defenition: A credit system where retailers issue cards that allow customers to make purchases and pay later, often with special deals and rewards.                          

            Advantages

·       Offers store-specific discounts and bonuses

Disadvantages

·       Higher interest rates than regular credit cards

PayPal

Defenition: PayPal is an online payment service that acts as an intermediary between a user's bank or credit card and merchants

               Advantages

·       Ability to dispute transactions and get refunds

Electronic transfer

Defenition: Both EFTPOS and BPAY are electronic payment systems that allow consumers to transfer money from their bank accounts to businesses, either at the point of sale or online.

Direct Debit

Definition: Direct debit is an automatic payment method where bills are deducted from a bank account at scheduled intervals.

Pros:
✅ Convenient for recurring bills (e.g., rent, utilities)
✅ Helps avoid late payment fees

Cons:
❌ Risk of overdraft if insufficient funds are available
❌ Users may forget to check bill accuracy

Cheque

Definition: A cheque is a written instruction to a bank to pay a specified amount from the drawer’s account to a payee.

Pros:
✅ Secure and traceable payment method
✅ Can be used for large transactions

Cons:
❌ Processing takes time
❌ Risk of fraud or bouncing due to insufficient funds

Lay-By

Definition: Lay-by allows customers to reserve a product by paying a deposit and making regular payments until the full amount is paid before receiving the item.

Pros:
✅ No interest charged
✅ Helps secure an item before full payment

Cons:
❌ If payments aren’t completed, the store may cancel and refund less fees
❌ Becoming less popular due to 'buy now, pay later' services

Book-Up

Definition: Book-up is a credit system where retailers allow customers to purchase goods and defer payment for a set period.

Pros:
✅ No interest charged unless extended
✅ Useful for tradespeople and those in remote areas

Cons:
❌ Requires store-specific agreements
❌ Can lead to overspending if records aren’t maintained

Afterpay

Definition: Afterpay is a "buy now, pay later" service that allows consumers to split payments into four equal installments.

Pros:
✅ No interest or extra fees if payments are made on time
✅ Instant approval and quick checkout process

Cons:
❌ Late payments incur fees
❌ Can encourage overspending

Consumer Protection

·       Competition & Consumer Act 2010

·       Fair Trading Act 1987 (NSW)

False and misleading advertising

·       Bait & switch advertising- advertising a few products at reduced prices to attract customers. Once this product runs out, customers are directed to higher priced items

·       Misleading advertising – Some adds use words that are deceptive or claim that a product has specific qualities that it doesn’t have

Referral Selling

·       A ‘special deal’ is offered is someone buys the product the supplies names of potential customers to the trader

Unordered or solicited goods

·       Sending unordered goods through mail and the demanding payment

·       You are protected by The Competition and Consumer Act 2010

·       1^st step is to write to the trader, explaining where you found it

·       The good is yours after 1 month after the letter was mailed or 3 months if it wasn’t mailed

Special Prizes & Offers

·       You receive a email or text saying you have won a ‘mystery prize’. But to claim it you have to buy other stuff, or pay a holding fee

Get rich quick schemes

·       A letter or email arrives offering you to help transfer money from another county

·       By helping you will receive a portion of that amount

·       But by supplying personal information, scammers could steal your money

Pyramid Scheme

·       Often in the form of a chain letter, you are required to pay a joining fee to earn money by recruiting new members

Contracts

·       A contract is a legally enforceable agreement between two or more parties

·       The contract outlines the details of the agreement

·       This can be oral or verbal

The 3 steps of a contract

1.       Offer

·       An offer is a proposal

·       It involves one party offering something of value to the other party

·       This must be clearly communicated

2.      Acceptance

·       Acceptance occurs when the offeree agrees to the proposal

·       This again must be clearly communicated

3.      Consideration

·       Requires each party to give up something of value

Legal rights of consumers

1.       Safe products – Direction for proper use are provided & tested by manufacturer

2.      Accurate product information and descriptions

3.      Full disclosure of the terms and sale – full price is displayed

4.     Consumer guarantees and warranties are honoured – get a refund or exchange if faulty

Protective Legislation

·       In 2011 the Australian Consumer Law was introduced working with the Australian Competition & Consumer Act 2010. It’s main purposes are to protect consumers against undesirable business practices

·       Misleading and deceptive advertising

·       Unethical conduct

·       Misrepresentation of products

·       False claims

·       Unfair trade practices

However the most common wats retailers try to get around this are

·       Fine print – important details written smaller thus harder to read

·       Before & after advertising – the comparison is distorted so before images are worsened

·       Tests & surveys – give false surveys that were never conducted

·       Country of origin – accuracy in label (made and product of are 2 different things)

·       Packaging – size and shape of packaging give misleading impressions

Consumer guarantees - goods

·       Are of acceptable quality

·       Are fit for purpose

·       Comply with warranty – a voluntary promise made by mananfacturer

·       Legally owned by the seller

·       Have spare parts reasonably available

Services

·       Fit for purpose

·       Provided with reasonable skill and care

·       Provided within a reasonable time

Responsibility of consumers

·       Pay right amount

·       purchase from ethical & legal sources

·       using in environmental manner

·       accepting the risk

·       caveat emptor – let the buyer beware

Organizations that provide assistance for consumer

·       New South Wales Fair Trading is the state consumer protection agency that:

·       Assists consumers to resolve their complaints

·       Checking products meet safety standards

·       Ensure weighing items are correct

·       Warning people

·       Ombudsman means agent, someone who has the task of investigating and reporting complaints

1.       Australian Securities and Investments Commission – protects consumers in consumer credit, investment, life and general insurance, superannuation

2.      Australian Competition and Consumer Commission – the enforcement of the Competition and Consumer act

3.      CHOICE – independent organisation to provide consumers with information and guidance abouts goods and services

Consumer Redress

·       If the goods are different from how they were labelled, faulty

1.       Contact the trader

·        If calling, always get the name of the person

·        Keep a record of the conversation

·        File documents for proof of purchase

·        Return promptly

·        Check your guarantee

2.      NSW Fair Trading

·       The office will try to contact the trader to reach a solution

3.      NSW Civil & Administrative Tribunal: the tribunal can

·       Order that money owed does not have to be paid

·       Order for goods or services to be provided

·       Order faulty goods be fixed or replaces

·       Order a refund and goods to be returned