12 Ways Online Retailers Trick You Into Spending More Money

In my life as an online business owner, I use many tried-and-true methods of tricking people into spending more. And I do it because they work. If they didn’t, online stores wouldn’t use them.

But that doesn’t mean you have to fall for them. As you shop online, whether for physical goods or online services, keep your eyes out for these tricks to make you spend more money online.

Ways Online Retailers Trick You Into Spending More Money

If you want to spend less money on things you don’t need, it helps to be aware of these tricks used by online retailers to separate you from more money than you originally planned.

1. Volume Discounts

It’s an old trick: offering a discount if shoppers spend more money.

These could be as simple as 10% off all orders of $100 or more. E-commerce retailers also often offer free shipping for all orders over a certain amount, such as $25.

You know it works on you too. We’ve all wracked our brains to come up with something else we need to order to meet that minimum order threshold and eliminate shipping costs.

In this case, knowing isn’t half the battle. We keep doing it even though we know it’s tricking us into spending more than we otherwise would.

2. Upsells

Upselling involves pushing you to buy a more expensive version of the thing you’re already planning to buy.

For example, you ask about a $25 bottle of wine at the restaurant, and the server steers you toward a $50 bottle instead.

In online shopping, this takes more subtle forms. For example, when you’re browsing lower-end coffee makers, the e-commerce site displays higher-end models on the sidebar or somewhere else on the page. They tell you other customers bought them or that these are more popular before showcasing their higher-margin wares.

Sometimes, they get even more aggressive and say the other items were better-reviewed.

And they don’t just put them on product pages. They also display them prominently in internal search results, often either highlighted or flagged as recommended. Or they just show their most expensive products first among the search results.

Funnel Stacking

An advanced form of upselling involves leading customers through a sales funnel with ever-increasing purchase options.

For example, you attend a free webinar. At the end of the webinar, they push you to buy a $99 online course. You do, and you enjoy it, but it doesn’t include all the detail you want.

Meanwhile, they start pushing you to buy their $999 premium course with four times the content and many extras and add-ons included. They even offer to apply the $99 you already spent toward your purchase.

So you buy the premium course for an extra $900. In for a penny, in for a pound, right? And this course is more detailed, but it still leaves you with some questions.

The course creator starts emailing you offers to work with them in one-on-one coaching for a truly personalized experience. That costs $250 per hour with a minimum of six sessions.

Or perhaps they come at you from a different direction. They offer a done-for-you model in which they do all the heavy lifting to help you start doing your desired activity. And it’s expensive at $9,999, but they guarantee results and do all the work for you. You tell yourself it will save you money in the long run by getting you out of the gate sooner.

Little did you know when you attended that free webinar, you’d soon pay that company $10,000 or more.

3. Downsells

It goes the other way too.

Downselling involves offering you something cheaper if you refuse the first offer. For example, you ask about the price of a wine, and when the bartender sees your eyes widen in shock, they propose an alternative bottle they say tastes similar but costs less. They don’t want to lose your business entirely, so they aim lower.

In the online space, downselling often takes the form of follow-up emails or notifications about abandoned carts. They may offer you a small discount or propose a cheaper alternative to lure you back and complete the sale.

Alternatively, some websites use exit intent monitors to flash you a last-ditch offer when you go to exit the site. When your mouse icon tracks toward the back button or to close the browser tab, suddenly a large, colorful display ad appears offering you a discount or cheaper alternative not as easily found on their site.

As far as the seller’s concerned, a lower sale is better than no sale at all.

4. Cross-Sells

Not to be confused with upselling, cross-selling involves encouraging you to buy products in addition to your primary purchase.

Watch out for these examples of cross-selling in your online browsing.

‘You Might Also Like…’

When you add something to your cart, retailers often recommend additional merchandise that goes well with it.

For example, you add a coffee maker to your online shopping cart. The retailer then suggests you also add coffee, coffee filters, a coffee bean grinder, or a one-of-a-kind coffee mug that gives you a back massage while singing your favorite song.

These products tend to be highly relevant and targeted specifically for your purchase. That makes it all too easy for you to say, “Hmm, you know what? That actually sounds really useful.”

Cue the cash register bell for the online retailer.

Product Bundling

Sometimes, e-commerce companies bundle related products together. For example, you can add both that coffee maker and the coffee bean grinder to your cart as a single purchase.

In the most egregious cases, they don’t even let you buy them separately.

More often, they offer some small discount when you buy them as a bundle, such as $5 off.

In some cases, they push the bundles far more aggressively than the individual products. That can take the form of them appearing first in internal website searches or being flagged with bright, colorful banners saying things like, “Best Deal” or “Bundle and Save.”

The Checkout Squeeze

Many online sellers wait until checkout before hitting you with a series of often highly manipulative and pressuring cross-sells.

Travel booking sites and airlines are notorious offenders here. For example, on an airline’s site, after selecting your flight and proceeding to checkout, it bombards you with potentially expensive offers like:

  • Do you want travel insurance in case you have to cancel or change your flight?
  • Do you want to choose your seat?
  • Do you want to check a bag? How about a second bag?
  • Do you want automated online flight check-in?
  • Do you want priority boarding?
  • Are you sure you don’t want to upgrade to first class? What about business class or premium economy?

The last one also represents an upsell. But each of the others is just an add-on service designed to separate you from more of your money.

It’s the same way when you book a rental car. They push you to buy additional services and protections, such as car insurance, a GPS unit, unlimited mileage, and prepaid gas.

Post-Purchase Cross-Selling

The push for more of your money doesn’t end after you buy. On the confirmation page, some companies push you to buy even more.

For example, they say it’s not too late to add to your order, then display those related items that go oh-so-well with your purchase.

Savvy marketers even include cross-sells in the confirmation email. You open it, and somewhere near your purchase information it says something like, “Add these within 24 hours, and we’ll include them in your shipment.”

5. Contrived Urgency and Scarcity

If you know you can buy something any time, you don’t have much motivation to buy now.

So marketers use scarcity — real or invented — to pressure you to decide immediately.

For example, when you use a hotel booking app, they display the number of rooms left for your dates. Airlines do the same with seats when you search fares. “Only four seats left at this price!”

Similarly, they may display notifications or send an email telling you multiple other people have looked at the same flight in the last 24 hours. This tactic combines a sense of urgency with a retail trick known as social proof.

Or they simply invent scarcity. They sometimes achieve it with flash sales and limited-time offers, an old strategy. A more recent approach involves a limited-time launch, where they open a specific product for sale for a few days before closing the cart again. Alternatively, they sometimes include extras and freebies only for a limited window.

Websites often emphasize the urgency with a countdown clock. The constantly moving visual creates a visceral sense you must act now or risk missing out.

In some cases, the “sale price” is actually the real price, and the full price tag is simply inflated to create a false baseline outside regular promotions. For instance, retailers may raise prices just before Black Friday so they can display a steeper “money-saving” discount. The same trick works just before a buy-one, get-one-free sale. Retailers can then adjust the price back to normal after the sale if they so choose.

6. Social Proof

In psychology, social proof refers to the validation of a person, place, or thing by other people liking and using it. We see others flocking to a new restaurant and view it more favorably than the sleepy alternative across the street.

Websites have used social proof tactics like testimonials since the dawn of the Internet. As social media grew in popularity, companies also started showing off their number of followers, likes, or shares, even if they bought them.

More recently, companies have started using little notifications at the corner of the screen saying something like, “Dawn from Denver just invested in our course,” with a small photo of Dawn. A short time later, another face and name pop up, indicating they bought it too.

In most cases, these don’t reflect real people or purchases. They’re preprogrammed on a timer loop with a set list of names and photos. It’s just one more sneaky way to make you feel more comfortable buying because you see so many other (fake) people buying the same product.

7. Push Notifications

Online businesses know how few people read their marketing emails. So even as they try to find ways to collect your email address for their mailing list, they’re also on the lookout for other ways to reach you.

One way is asking if you’d like to receive notifications in your browser. If you opt in, they can use push notifications to display messages to you any time they want. These messages appear right in your browser, even as you visit other websites. Marketers use them to promote a discount or sale, to let you know about new products or content that’s available.

They don’t need to collect any personal information — all you have to do is click a message agreeing to receive these messages in your browser or on your mobile device.

Unlike emails, these messages reach users more effectively because they display right in your face without you having to open anything. These messages can include rich media, making them even more flexible for marketers.

That’s why it’s best to decline push notification requests from websites.

8. The Freemium Model

Everybody wants and expects things of value for free. As a business owner, it’s infuriating.

So many business owners offer a free version to get prospects in the door. Once there, they can upsell them to a premium version to monetize those users.

Phone games offer a classic example. They’re free to download and play but come with limitations, delays, or annoyances unless you pay something. Some games (and other apps) display ads frequently unless you upgrade. Others build in delays, such as a 12-hour waiting period while your character constructs a building or upgrades to a higher level. You can avoid those delays by paying a small fee.

In my software business, many of the tools and services are free. That gets people using the software, and from there, we can encourage them to take advantage of our premium features as well. In one case, we offer both a free and a premium version of an important legal form.

Like most of the other tactics, the freemium model isn’t inherently unethical. It merely represents a modern example of a loss-leader marketing campaign. The company takes a loss by offering an outstanding deal to get people in the door, then upsells and cross-sells them to convert them into a profitable customer.

An offline example of a loss-leader is a huge TV sale. The electronics retailer lures you in with a discounted TV offer and makes back their profits by selling you accessories like a mounting kit, Blu-ray player, Apple TV, and connecting cables. In freemium models, the free plan is the TV, and the additional features of the paid plans are the accessories.

9. Member- or Cardholder-Only Sales

One way retailers trick you into spending more is by offering promotions exclusively for members or store credit cardholders. From grocery stores to brick-and-mortar stores to e-commerce companies, it remains a classic retail trick.

That incentivizes a fresh wave of people to sign up as members or open an in-store credit card. They get to collect your contact information for future marketing campaigns. Plus, people inherently want to get the most out of their membership or card, so they spend more with that brand.

It’s nothing new, but it’s certainly effective.

10. Psychological Pricing Tricks

Retailers sometimes get practical with their college psych classes.

The “anchor pricing” trick involves showing you an outrageously expensive item first — usually something no one buys anyway. Every other price you see after that looks reasonable compared to the original anchor price, even if you originally had no intention of spending that much.

The “Goldilocks pricing” trick works similarly. In this variation, the retailer displays three options for comparable products. One is priced astronomically high, and another is cheap but visibly shoddy and inferior. The middle product is the one they actually intend to sell you, which again looks reasonable by comparison. But it’s still usually a higher-priced product than other alternatives on the market, many of which are probably good choices at better prices.

That’s one of the benefits of Amazon. Their marketplace is so extensive you can quickly browse through dozens of similar product options. That prevents some of these pricing tricks.

11. Individualized Marketing

Big Tech giants like Amazon and Google have far too much personal data about you. And they can use precision marketing to target you with laser focus. And no, it doesn’t require you to actively search for a product online.

Last Christmas, I discovered firsthand just how extensive (and invasive) that data collection is. In the privacy of my living room, I told my wife I wanted a Mark Andrews jersey. I never once typed this into a Google search or otherwise indicated buyer intent. But suddenly, I started seeing ads for Mark Andrews jerseys when browsing the Web on both my phone and laptop.

I couldn’t figure out how Big Brother knew about my designs on an Andrews jersey. I realized there could only be one of two culprits: Amazon’s Echo Dot, which I have in my living room, or my Android phone. One of them overheard my passing comment and collected it as an advertising data point.

Privacy is dead. Big Tech is listening everywhere, all the time, even when “off.”

12. Easy Enrollment, Hard Cancellation

All subscription services make it as easy as possible to enroll and set up recurring payments. That’s simply good business.

But many make it much, much harder to cancel. In some cases, you can’t do it through their website at all — you have to call them, navigate through their (inevitably tedious) phone tree, and eventually, when you reach a human employee, they will try to talk you out of canceling. If you insist, they’ll offer you discounts, freebies, or other incentives. Only with the greatest reluctance will they let you out of your subscription.

Making it easy to buy is one thing, but intentionally designing your system to take a Herculean effort to opt out of future purchases is one of the more manipulative and dishonest practices on this list.


Final Word

Marketers and consumers are forever locked in an arms race. But as marketers invent ever subtler and more creative ways to separate customers from their money, customers become savvier.

A decade or two ago, you probably stopped and looked at that colorful pop-up ad that appeared while you were halfway through reading an article. Now, you likely close it without even glancing at it.

Simply be aware of the tricks they use as you shop online. Pause and think before whipping out your credit card, and implement a 24-hour delay before all purchases over $24. If you really want or need something, you’ll come back for it. But if not, you’ll probably shrug and say, “never mind.”

Source: moneycrashers.com

6 Stocks to Buy as the Market Recovers From the COVID-19 Pandemic

The COVID-19 pandemic has changed the world. Face masks became a way to express yourself, shopping online has become the norm for the masses, travel all but died, children experienced school at home rather than in classrooms, and adults are moving to working remotely with shocking speed.

Some of these adaptations will prove to be nothing more than short-term changes in behavior and trends. Others are here to stay.

The stock market, too, has been on a wild ride. Parts of the economy were closed, revenues for some companies all but ceased, and investors reacted with a selloff, sending stock prices plummeting in just about every sector except health care. While some stocks, especially tech stocks and a handful of meme stocks, have made nearly a full recovery, many sectors of the market continue to struggle.

There’s Good News Nearly Every Week

On the other hand, the novel coronavirus has also showcased the power of the human mind and our ingenuity in the face of a novel danger.

As the pandemic took hold and lockdowns were set in place, the world’s smartest minds immediately began working to develop vaccines and treatments with the potential to slow the spread of COVID-19. Working at a lightning pace, these scientists have done something never seen before.

In a matter of months, they went from nothing to drug candidates and clinical trials, and vaccines hit the market in less than a year. This is a process that normally takes years, often more than a decade.

As vaccines make their way into arms, the world is slowly getting back to normal. So, with a little luck, the crisis may be in the past faster than we once thought possible.

Pro tip: David and Tom Gardener are two of the best stock pickers. Their Motley Fool Stock Advisor recommendations have increased 563% compared to just 131.1% for the S&P 500. If you would have invested in Netflix when they first recommended the company, your investment would be up more than 21,000%. Learn more about Motley Fool Stock Advisor.


This Good News Creates Compelling Investment Opportunities

Sure, the past year was rough, but with vaccines being distributed and the world finding a state of normalcy, several compelling investing opportunities are being created. Today, consumers are starting to feel more comfortable going back to their daily routines.

And with comfort will come spending.

Consumers who have been stuck in their homes, unable to travel, visit friends and family, and enjoy comforts like movie theaters and restaurants, will soon be able to do these things. As such, a cooped-up population of consumers will be ready to, well, fly the coop.

As this happens, spending will increase, creating growing revenues and profits for the downtrodden industries hit hardest by the pandemic, which will provide exciting opportunities for investors to play the rebound.

Moreover, with the United States Federal Reserve — also known simply as the Fed — maintaining low interest rates and bond buying programs to ease the economic burden, resistance has all but disappeared from the market, leading to prices trending in the positive direction in one of the fastest recoveries in market history.

Of course, fast-paced markets are often riddled with volatility. So, choosing the right stocks to invest in, rather than blindly throwing money around, is crucial.


Stocks to Buy for a COVID-19 Stock Market Recovery

Although the stock market as a whole will likely see dramatic gains as the COVID-19 pandemic becomes a thing of the past, not all stocks are created equal. Even in the rally that’s likely ahead as a global recovery takes place, there will be companies that win and those that lose.

So, it’s just as important now to make the right moves in the market as it has ever been.

Nonetheless, making the right investments in today’s environment has the potential to be overwhelmingly lucrative. Below are a few names that you should consider as you look for stocks that are likely to benefit most from a COVID-19 recovery.

1. Southwest Airlines (NYSE: LUV)

The airline industry has been one of the hardest hit corners of the stock market, and for good reason. Consumers were told to stay home as the coronavirus pandemic took hold. You were told that the more you left your home, the more likely you were to come down with a deadly illness, and that travel should be limited to necessities and nothing more.

If you’re like the vast majority of Americans, traveling on an airplane, packed into a metal cylinder with hundreds of other passengers breathing recycled air, was simply out of the question.

With COVID-19 vaccines now available and widely used, consumers are going to be itching to get away from home and enjoy their vacations again. This has resulted in a boom in demand for air travel, making the battered airline stocks worth diving into. In fact, while it is one of the slowest to recover to date, Southwest Airlines has seen its share price climb from around $45 per share to more than $57 per share in the first five months of 2021.

In my humble opinion, when it comes to airlines, Southwest Airlines is the best pick due to the type of flights the company makes its money from. In 2019, before the coronavirus struck, 97% of Southwest Airlines’ revenue was generated through low-cost domestic flights.

These are the specific types of flights that will be in high demand as the COVID-19 pandemic fades away. College students will want to travel to see their parents and hometown friends, and families will want to travel to theme parks and other attractions. Couples will want to travel to the mountains for a romantic week away. The general consumer will want to get out, and when that happens, low-cost domestic flights will be in high demand.

According to Statista, Southwest Airlines is the third largest domestic airline by market share, with control of 17.4% of the market. The company is the second leading airline in the domestic flight sector of the U.S. market, behind only American Airlines with 19.3% of market share.

Historically, American Airlines and Southwest Airlines have been the premier low-cost airline solutions, yet Southwest tends to be cheaper than American. Considering the current economic environment, travelers will likely be looking for the best deal at the lowest cost. As a result, Southwest Airlines may climb from #2 to #1 by market share through the COVID-19 recovery. As such, this is a stock that should not be ignored.

Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Stock Rover can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.


2. Carnival Corporation (NYSE: CCL)

An investment in Carnival Corporation follows the same logic as an investment in Southwest Airlines. Carnival Corporation owns and manages Carnival Cruise Line, one of the largest cruise lines in the world.

According to ResearchGate, Carnival is the largest cruise line in the world by market share, serving a massive 42% of passengers and controlling more than 37% of global cruise revenue.

Like others in the travel industry, Carnival Corporation’s stock has seen a tremendous decline as a result of COVID-19. Unfortunately, by September 2020, the stock had given up more than 65% of its value.

2021 has been quite a bit better for the company, with share prices climbing from around $20 to nearly $30 from January to mid-June, but the stock has yet to find its way back to the record highs it experienced prior to the global health crisis.

These declines represent a massive opportunity.

The market seems to be pricing Carnival Corporation stock as though the cruise-line industry isn’t going to see a comeback for years to come. The stock is trading at just over three times its cash on hand and just a fraction of its book value. That’s a ridiculously low valuation for a company that controls the lion’s share of a multibillion-dollar market.

With vaccinations taking place at lightning pace, the virus may soon be under control. Although it may take a year or so for cruise lines to be booming again, Carnival is far more valuable than the market is giving it credit for.

Not to mention, with more than $6 billion in cash on hand and more than $50 billion in total assets, the company has a strong financial foundation that will allow it to make it through these hard times and thrive on the other side.

From a fundamental standpoint, Carnival Cruise Lines represents one of the largest opportunities in the travel industry as a whole. The stock controls a massive percentage of the cruise-line market, has plenty of cash on hand, and will likely benefit greatly as consumers begin to travel on the tailwinds of the COVID-19 pandemic. This is a stock that’s worth strong consideration.


3. Amazon.com (NASDAQ: AMZN)

Amazon.com has done incredibly well in the face of COVID-19. In fact, from January 2020 through May 2021, its stock price climbed by more than 60%. That’s a dramatic run for any company. In most cases, a move like that would scream “take profits.” However, we’re not talking about just any company.

Amazon is the leader in U.S. e-commerce. Many consumers didn’t feel comfortable shopping in brick-and-mortar stores during the COVID-19 crisis, so it actually gave the company a big boost in sales.

The company is also one of the leaders in cloud computing in the U.S. That has been overwhelmingly important to the ability of online companies to meet the incredible demand for bandwidth as consumers spend more time at home shopping on and surfing the web.

At the same time, cloud computing has seen incredible growth in demand as companies across the U.S. have moved out of the office and begun to have their employees work from home. Amazon has been a big winner in both the e-commerce and the cloud computing spaces.

But what happens when the major threat from the virus is in the past?

Many of the changes that have taken place as a result of the pandemic will pass along with the virus. However, other changes are here to stay. For example, before COVID-19 took hold, there was a major trend toward consumers shopping online more every day. In terms of e-commerce, COVID-19 didn’t create the trend; it sped it up.

Consumers who would not have otherwise been exposed to online shopping are buying everything online these days. That’s not likely to change, even if and when COVID-19 is eradicated. As such, online shopping trends are likely to continue.

Also, many people who are working from home as a result of the pandemic aren’t going back to the office when lockdowns are over. Several large companies have realized that remote employees come with great benefits. With employees working from home, overhead office costs are lower.

Moreover, when the Internet is the office, companies are no longer limited to local talent when hiring, greatly expanding the pool of potential candidates. As a result, many believe that remote working is the way of the future for several companies, with many big names already saying that some of their workforce will never go back to the office.

That bodes well for Amazon Web Services, the company’s cloud computing solution.

Considering that both of the trends that are massive revenue drivers for Amazon are likely here to stay, the company and its investors have quite a bit to look forward to ahead. As such, Amazon stock is one to pay close attention to.


4. Clorox (NYSE: CLX)

There’s another trend the COVID-19 pandemic has likely changed for the long term — general habits around cleanliness. Ever since the virus started to circulate, you’ve been told to wash your hands, clean surfaces, wear a face mask, and be as clean as you possibly can.

It all makes sense. Face masks stop the spread of water droplets as you breathe, reducing your chances of infecting others if you’ve contracted the virus. General cleanliness kills the virus before it has the opportunity to infect you or your loved ones.

As a result, cleaning products have been flying off of the shelves for some time now. The demand for cleaning supplies is higher than ever before, and manufacturers are having a tough time keeping up.

Clorox is a consumer staples company that’s best known for its cleaning products. In fact, when you think of bleach, the company’s name is likely the first to come to mind. Of course, the pandemic has done well for the stock. From January through August, the stock grew by around 50% before growth began to taper off. Nonetheless, after a several months-long selloff, many argue that the stock is highly undervalued, representing a major opportunity.

If COVID-19 taught consumers anything, it’s the importance of cleanliness, both in terms of personal hygiene and for the home, office, and shared spaces. This is one of the changes that’s likely here to stay. Due to the virus, consumers are going to clean more often, leading to continued and increasing demand for cleaning products.

With Clorox being the leader in the space, the company is likely to see strong growth as consumers continue to clear the shelves of their branded cleaning supplies, suggesting that there’s plenty more room for growth in the stock ahead.


5. Home Depot (NYSE: HD)

This is the least obvious stock on the list, but it has earned its place in the lineup. COVID-19 has had an extreme impact on economic conditions within the United States. The last time this many Americans were out of work, the U.S. was in the depth of the Great Depression. It’s a tough time.

So, why would a building materials and tools store be a strong investment?

Well, it has to do with how tough economic times change monetary policy. In an effort to stimulate economic growth, the Fed has vowed to keep interest rates low for the foreseeable future.

Low interest rates create the perfect lending environment. Consumers want to borrow money because it’s cheap to do so, and lenders want to hand money out because they’ve got plenty of cash, thanks to loosened economic policy. It’s a match made in heaven.

When interest rates are low, we see two important trends that will have a massive positive impact on Home Depot:

  1. Real Estate. When rates are low, it’s a great time to buy a new home. Mortgages at rates as low as 3% lead many people to build the homes of their dreams. Of course, when there’s a lot of building going on, Home Depot benefits from the sale of building supplies and tools.
  2. Remodels. Again, it’s cheap to borrow money when rates are low. Large remodeling projects that seemed out of reach are now becoming more affordable. Again, this bodes well for the construction material and tools powerhouse that is Home Depot.

Interest rates aren’t the only force driving construction demand. There are two other factors driven by the COVID-19 pandemic that bode well for Home Depot:

  1. People Are Relocating. With so many jobs moving to remote offices, people who were once tied to a specific region can now live wherever they’d like. This is leading to what could become a mass migration, ultimately leading to more homes being built.
  2. Furlough and Layoff Relocation. As the crisis flared up and governments in some areas maintained shutdowns, many people remained out of work. This has led to more relocation as many families look to new areas and the job opportunities that come with a potential relocation to cities where businesses have reopened.

All of this is likely going to continue for the foreseeable future. The Federal Reserve will keep rates low to promote economic recovery, continuing growth in new construction.

At the same time, relocation associated with the ability to move away from the office and job turnover are likely to continue as well. Company owners and employees alike are realizing major benefits of remote work and may choose to set up shop someplace new.

Considering Home Depot’s leadership in construction materials and tools, and the fact that demand for these products will likely continue to climb, the stock is one that should not be ignored.


6. Zoom Video Communications (NASDAQ: ZOOM)

Zoom Video Communications is another company that got a major boost from the pandemic. The company offers video conferencing services that quickly became popular for two key reasons:

  • The Work-From-Home Trend. Although many companies have moved to a work-from-home setting, communication between management and employees and among colleagues is best done in a face-to-face setting. As a result, companies looked to video conferencing services to scratch that itch.
  • Family and Friends. For many, talking to family and friends on the phone just wasn’t enough during the shutdown. Although video conferencing doesn’t have the same appeal as human contact, it was the best option in a bad situation, leading many consumers to sign up for Zoom’s services.

While people are beginning to make physical contact with friends and family again, the crisis led many who live far away from each other to start using the platform, which is likely to continue. Moreover, companies who plan on maintaining the work-from-home environment have made video conferencing part of their day-to-day activities.

That bodes well for Zoom in the long-term.

As a result, the stock saw tremendous growth throughout 2020, and while those gains have tapered off a bit, the selloff is likely overblown. Investors who get in at today’s relatively low levels are likely getting a discount on tremendous future growth.


Final Word

COVID-19 has been a painful experience for everyone. It has changed the shape of our lives, and will have a lasting impact on how we see the world. However, this lasting impact will create several compelling investing opportunities in the short term and in the post-pandemic world.

As always, it’s important to do your research and understand the risk vs. reward profile of any investment you make. Just because the industry a company is in will benefit in the post-COVID-19 environment doesn’t mean that the company itself will be a winner. When choosing an investment, be clear, be educated, and be profitable. You can only be those three things with proper due diligence.

Disclosure: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.

Source: moneycrashers.com

6 Hidden Costs of Starting a New Business in 2021 + How to Reduce Them

There are many expenses that might take you by surprise when you start your own business. We’ve gathered six common expenses and tips for managing them. 

By

Kate Noether, Partner
June 28, 2021

know your market and understand the costs you’re up against when starting your own business

Hidden costs for new businesses

Anyone who has ever worked long hours at a dead end job may have dreamed of being their own boss someday. Maybe you have a side hustle or a hobby you’ve wanted to expand into a business.

However, being your own boss is challenging, and it’s definitely not for everyone. The reality is that working for yourself often means working harder than you ever have before — not to mention barely breaking even for quite some time.

Costs like office space, equipment, and payroll are to be expected and may be easier to calculate. But, there are many expenses that might take you by surprise when you launch your startup. Everything from the hidden costs of website maintenance to acquiring the right kind of insurance can set you back if you don’t plan for them.

Before you take the leap, here are six hidden costs that you should know about, plus some tips on how to make them more manageable.

Startup funding

You might think that you can just start your business small and build upon it. But even a stellar business idea requires some capital to get it off the ground. Unfortunately, this is also one of the hardest parts of starting a company.

Some new business owners don’t understand the finances behind starting a business well enough to present their financial information to loan officers or potential investors. What’s more, women, persons of color, and other minorities underrepresented in the startup space face additional bias and challenges. For example, one study found that black business owners were 10% more likely to apply for startup assistance but 19% less likely to be approved.

Rather than trying to obtain a bank loan — or using your personal savings — consider crowdfunding or angel investors.

You could also look into small business grants, which don’t need to be repaid.

This may be the nest egg you need to get your business off the ground in the event you are unable to acquire a loan or other funding source.

Startup fees

It would be a mistake to avoid the two crucial expenses for starting any business: hiring an accountant and a business lawyer. Regulations about licensing vary from state to state, as do tax filing deadlines and fees. These also vary by the type of business or service and corporate structure. You can cut some of these costs by only using a business lawyer and accountant for your initial consultation about corporate structure, tax obligations, and insurance requirements.

Budget management is also critical from day one. One of the first things you acquire for your business should be quality accounting software. Make sure your accounting tools come with crucial features such as robust small business accounting reports and accountant-friendly software to avoid any regulatory headaches or overlooked expenses on tax day.

Insurance

Insurance is an expense you’d rather not need, but you’ll be glad you have it when the unexpected happens. Plus, for some states and industries, it’s a legal requirement. If you have any employees, you’ll also need to consider workers compensation as well as health and life insurance.

Insurance is the one expense you can’t put off, so it’s best to shop around for the best rates and policies for your current situation. Consider only getting a liability insurance plan at first if that is feasible for you in terms of risk, and discuss your options with your provider.

You can always add coverage as your business grows, so it’s important to get flexible insurance plans.

Administrative costs

These are the little costs that you might have taken for granted when you worked for someone else, but they really add up if you aren’t paying attention. Admin costs include big things like computers and software, in addition to little things like ink, paper, and other office supplies. If you’re working from home, you will even have to consider the effect of running a home office on your electric bill.

If you meet certain requirements, you can deduct part of your rent or mortgage, phone, and utility bills for business use of your home.

Keep in mind that office supplies are less expensive when you buy them in bulk.

As for your tech solutions, consider the cost-benefit of leasing versus buying, outsourcing versus in-house, and SaaS or PaaS. These alternatives may come with upgrades and maintenance built into the contract.

Building your website

No matter what type of business you plan to launch, you’re going to need a website. And one thing to beware of is that even “free” websites aren’t really free. Hosting services that claim they are free will often make money by selling your data or forcing you to have ads on your site.

There’s also a chance that you won’t even own your domain or have the freedom to move your website later. When preparing to build your site, you’ll need to consider the cost of registering your domain, designing the site itself, and finding a hosting provider.

Usually, the main expenses are domain registration and a reliable hosting provider. There are some trustworthy, inexpensive options out there, but be wary of hidden costs. According to Alex Williams of Hosting Data, you should be strategic about the hosting service you decide to use. This is because some hosting providers will try to up-sell, such as trying to get you to purchase add-ons that you could get for free simply by making clever use of your control panel.

“If your main goal is to save time without worrying about the cost, upsells won’t bother you,” says Williams. “But for the budget conscious among us — keep a lookout for these features that improve upon your inexpensive plan – at a premium.”

Advertising

Perhaps you think that telling your friends and family or posting on Facebook is enough to get your business going. While your mom and your next door neighbor might account for a few sales, it’s not enough to keep you going for more than a few weeks. Social media is only as good as the effort — and sometimes, money — that you put into it.

You can save money on advertising by leveraging digital platforms and letting technology do the heavy lifting.

You can pay a small fee for targeted ads on most social media platforms, reach out to influencers with sway among your target demographic, or look into affiliate marketing.

The bottom line

Our goal is to help you avoid the pitfalls that can derail your new venture, and funding issues are one of the most significant challenges for new businesses. As you’re starting out, keep these practical tips in mind so you don’t overlook any critical costs that might bring your business planning to a halt.