Are Retailers Helpless In Overcoming Panic Buying?

A university study led by Rensselaer Polytechnic Institute finds rationing generally doesn’t work and emergency authority figures – not retailers –  stand the best chance at reducing “panic buying” during disaster-related situations. Managing supply was deemed nearly an impossible task for retail In the study. Collected surveys in dozens of countries showed a typical food distribution center has two days' worth of supplies. The researcher’s survey found that of households that engaged in panic buying during crises, 80 percent increased their inventories by a week and a half. “Managing demand is essential because modern supply chains rarely have the ability to quickly increase production and distribution of essential items,” said Jose Holguin-Veras, a transportation engineering professor from Rensselaer, in a press release. As far as controlling demand, rationing, whether voluntary or mandatory, was found to often fall short for three reasons. Rationing:

• Is typically implemented too late in the crisis when inventories are already too low to avoid shortages for many consumers;
• Has a high risk of being perceived as a social cue of a worsening crisis, causing consumers to increase purchases;
• Is not coordinated among retailers, enabling consumers to shop around for those not rationing and allowing others to sell their supplies at higher prices.

“Not surprisingly, rationing has worked well in cases where there is a legal framework—typically in the form of an emergency law—that allows the government to mandate rationing and price controls, such as Taiwan [in 2020]. However, most countries lack such powers,” Prof. Holguin-Veras said. One solution promoted in the study was to highlight messaging from “trusted change agents” (TCAs), which include the Red Cross, national/state/local emergency responders, firefighters, and national/state/local health officials. An accompanying survey found 89 percent of consumers would limit their purchases if asked by TCAs. The study concluded that tempering panic buying during crises requires collaboration between public, private and humanitarian organizations. “The public sector has the legal authority to intervene when needed, the private sector has control over the access and supplies, and the humanitarian sector has the deep community connections,” Prof. Holguin-Veras said.