In the wake of the COVID-19 pandemic that has brought the nation to a halt in recent weeks, consumers have begun panic buying, according to School of Management professor Nathan Novemsky.
One effect of this panic buying phenomenon is the empty toilet paper aisles around the nation. The Patch newspaper reported on March 13 that it only took 11 minutes for customers to take all the toilet paper off the shelves of the Aldi supermarket in Vernon, CT. As consumers are increasingly met with empty shelves at supermarkets, suppliers are struggling to keep up.
“This is a situation where people feel a lot of threat and fear, obviously, and not a lot of control,” Novemsky said. “So one thing they do have control over is going and buying a bunch of stuff. And more control makes people feel better about a bad situation.”
In an effort to quantify the effects of panic buying, economics professor Cormac O’Dea asked students in his “Introductory Microeconomics” class to rate the toilet paper stocks where they lived. He said that two-thirds of his students responded “grim,” while only five percent responded that there was no shortage of toilet paper in their area. O’Dea attributed the empty aisles to some rumor that toilet paper was going to run out, which induced consumers to buy more.
Bruce Wartlieb, who works at the Trader Joe’s in Orange, CT, said the store is experiencing shortages of paper towels and toilet paper.
“We’re restricting customers to one bag of toilet paper and paper towels,” Wartlieb said.
According to Novemsky, one reason for this panic buying phenomenon is that consumers are changing their own behavior based on what they perceive others to be doing. As other people purchase toilet paper, consumers start to view toilet paper as a scarce good. This then, he explained, makes consumers want to purchase toilet paper for themselves, while they still can.
Worrying about what other people are doing is abnormal in most modern economies, according to O’Dea, because consumers are used to shops being fully stocked. But he explained that in this abnormal economy caused by the coronavirus pandemic, consumers worry about scarcity and thus engage in panic buying.
Even so, O’Dea said that he is not worried about the shortages of toilet paper.
“Here’s something I am worried about: there are large parts of the economy … which are simply going to have to be shut down for public health reasons,” he said.
O’Dea explained that as businesses that involve face-to-face interaction shutter, consumer spending decreases. He added that social distancing, as well as general economic stress, further decrease consumer spending.
In the midst of all these new consumer spending practices, businesses are unsure of which changes will remain after the coronavirus pandemic and which changes will be temporary, Novemsky said.
“It’s hard [for businesses] to change [their] strategy, because in a few months [they will] be left out in the cold, when the consumer mindset shifts again,” he said.
Novemsky predicted that ordering goods online — instead of physically going to the store — may remain a predominant consumer behavior. He added that business travel will likely not return to pre-pandemic levels, as companies realize they can accomplish many of the same goals without being in the same physical location.
According to Novemsky, the pace of economic recovery will depend on how willing consumers are to spend money again, and how they look back on their time in quarantine.
“When people spend time at home and say, ‘This is great, I don’t need to go to restaurants, bars or clubs as much,’ they might decide they’re happy [at home],” he said. “Or there could be a rebound of, ‘Wow! I hate being at home, it reminds me of that lock-in time, and I want to get out of the house whenever I can.’”
He said that consumer behavior in countries such as Italy and China, which are ahead of the curve relative to the United States, could indicate the course that consumer spending — and economic recovery — will take in this country.
According to the Department of Commerce, U.S. consumer spending increased 0.2 percent in February.
Julia Brown | firstname.lastname@example.org