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The toilet paper crisis! Product demand patterns amid the Coronavirus pandemic


There is no doubt the Coronavirus pandemic has impacted consumer purchasing patterns. Look no further than the recent run on toilet paper! But what other changes in consumer purchasing behavior might we observe over the course of this global pandemic? To get some more insight, we asked our Chief Scientist and Co-Founder here at Akuret, Daniel Steeneck, Ph.D.


Akuret: By now, most people have heard about the run on toilet paper amid the Coronavirus fears. Can you discuss this a bit?


Daniel: Yes, it is a curious thing and a very good example of panic buying of a nonperishable essential product. Many have speculated the reasons for this consumer behavior. One explanation is panic buying by a just a few people, of a highly conspicuous product, could have induced a fear of missing out by other, otherwise unpanicked consumers. Add to this the media attention, and you have a full-blown buying frenzy of toilet paper. Of course, we may, to a smaller degree, see similar patterns in other essential product categories. But what will the sales patterns for these types of essential goods look like in the coming days?


Remember – fear is driving the sales right now, not increased consumption. In fact, I think there may be 3 phases of sales patterns.


1) In the first phase, which we have seen already, a small group of panic buyers trigger panic buying by others, just as one person standing up at concert forces everyone else to stand. Phase I is characterized by spikey demand with the product becoming unavailable quickly after being restocked and will continue until consumers have stockpiled enough product or they are confident in being able to obtain the product in the store.


2) In the second phase, some consumers are buying large quantities only after their stockpile is depleted, while others will purchase on a more regular basis, leading to a composite demand signal of spikey and smooth demand.


3) In the third phase, once the pandemic is subsiding, demand patterns will return roughly to normal, or slightly less than normal if many people have many days of supply in their home stockpiles.

Akuret: But what about perishable essential goods, like fresh produce, meat and milk?


Daniel: In this case, people will buy as much as they can use prior to the expiration dates of the products. Retailers, and their upstream supply chain, must be very careful interpreting this demand signal! You must ask yourself – has the true demand, during this pandemic, for this product increased because more people are eating at home rather than restaurants or are customers simply buying more to minimize the number of shopping trips? In any case, the sudden demand changes can negatively impact your supply chain and your future inventory levels. This applies to the nonperishable products as well.


Akuret: Why would sudden changes in demand negatively affect the supply chain? Wouldn’t you simply order more, or less, depending on what you sell?


Daniel: Demand spikes, or drops, resulting in a drastic change in the size of orders from a retailer cause a chain reaction in which suppliers then change their orders to manufacturers and so on. This, compounded with the lead-time for product orders to be fulfilled, creates a mismatch between inventory levels and actual future demand. This is the well-known bullwhip effect in supply chains. For example, toilet paper will likely be oversupplied in the coming months. In the case of perishable goods, the resulting oversupply could lead to huge amounts of product spoilage and subsequent underproduction leading to availability issues.


Akuret: Is the panic buying over for now, or will this persist throughout the pandemic?


Daniel: Good question. In short, we don’t know. Unfortunately, panic buying may become a recurring theme for a couple of reasons. Firstly, we may well have a second or third wave of the virus go through already impacted populations. This occurred with the Spanish Flu of 1918-1920. As each wave approaches, customers may again stockpile. Secondly, supply problems for a product may result if critical workers producing the product fall ill. In the case of nonessential products, governments may shut down production of these products to increase social distancing or redirect production to products such as protective equipment and ventilators. In either case, if customers do not trust the product will be available, they may stockpile.


Akuret: Other than panic buying, are there any other product demand patterns you foresee?


Daniel: Social distancing plays a big role in the demand patterns we will observe in the near term. For many products, such as automobiles and home electronics, many customers can delay purchases. I anticipate there being pent up demand observed when the social distancing restrictions are relaxed. Furthermore, I believe this will be compounded with promotional activities by manufactures who have built up high inventories. Again, be careful interpreting these high demand periods. However, this pent-up demand may be offset by a reduction in demand due to high unemployment resulting from reduced consumption in many industries such as restaurants and entertainment.

Additionally, with many people spending much more time at home, such as office workers and children, home office products and toys will see a short-term boost in sales.


Furthermore, customers may begin finding alternative sources of their products. Of course, buying online from an ecommerce site will see in an increase in popularity. Additionally, curbside pickup services offered by many grocery stores will be increasingly used. As an anecdote, a grocery store in my area quoted an order pickup time to my wife 5 days from her order time, and she was lucky to get that! Perhaps customers will look to source locally, especially for food, if national or global supply chains are disrupted.


Akuret: Well, this is certainly a lot to think about – any closing comments?


Daniel: Of course, there are many other demand patterns than the ones I mentioned that we will see in the coming months. However, I think the operative idea here is that demand will be spikey in nature and the key will be to determine if the signal is a one-off or indicates an actual change in overall demand. In any case, take steps to smooth the demand as much as possible and communicate with your suppliers to most effectively meet your customer demand during these volatile times!


Has your organization recently experienced changes in customer demand patterns? How do you think the demand patterns will change over the course of the Coronavirus pandemic? Is the pandemic affecting more your demand side, supply side or both? Share your experiences with us by commenting to this article.


Contact Daniel Steeneck directly at daniel@akuretsolutions.com or visit his LinkedIn page at www.linkedin.com/in/daniel-steeneck-0b5b9755

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