Goods on shelf
Goods on shelf

Supply chains remain stretched. The legacy impact of the pandemic, the recent lockdowns in mainland China constraining port activity, the ramifications of the Russian invasion of Ukraine and global container shortages are all affecting the ability of the world's producers to ship products from point A to point B.

We often talk of supply chain issues affecting consumers. What we don't often bring to light is that consumers are an integral part of the supply chain. Consumer behaviour affects supply chain dynamics far more than we might anticipate.

Consider this entirely plausible scenario. You are doing your weekly shopping at a medium-sized supermarket. You go to grab some peanut butter, but the brand that you like is out of stock. You consider buying an alternative brand but you decide against it. You'd rather wait until it's back in stock so you can have the brand you enjoy. It's no big deal.

Two days later you're in a different shop picking up some milk and you see your preferred brand of peanut butter on the shelf. You decide to grab three jars instead of the usual single jar, because you can't be sure it'll be available when you next do your weekly shop. The 'fear of missing out' (FOMO) has driven you to adapt your regular shopping habits.

This consumption habit may seem innocuous, but it has a downstream impact on retailers and suppliers.

"'FOMO buying,' explains supply chain expert Richard Bartlett, "when a shopper is temporarily unable to get a product they purchase regularly so they buy two or three times the amount next time they see it, is like a mild version of what we saw when petrol was running low in the UK. Lots of people panic-bought petrol, but what wasn't reported was the thousands of people who didn't fill up their tank, but who did buy more than they'd normally buy. Lots of people just slightly adapted their habits as a 'hedge' against the inconvenience of missing out in the future."

Bartlett, an international trade advisor and founder of supply chain consultancy Export Unlocked, thinks consumers are becoming more opportunistic in general.

"This isn't panic buying, people aren't worrying about mass shortages of essential goods. But consumers are developing a fear of missing out. They are noticing when a certain product is running low or out of stock, and their purchasing habits are adapting. It's about avoiding inconvenience."

Bartlett believes that this apparently minor change in consumer behaviour is already having an impact on supply chains.

"Retailers and manufacturers are being caught out by the peaks in demand for certain items, especially items with shorter shelf lives. The whole theory of modern supply chains is predicated on the idea of predictability and retailers being able to hold a certain level of stock in reserve, but factors like export controls and container shortages mean it's not as easy for retailers to do that at the moment."

"So we're seeing volatility as a result, which is causing consumers to behave more opportunistically. If they see something that was out of stock last week, they grab an armful. Manufacturers and retailers haven't yet figured out how to meet this new sort of demand."

He also believes that this behaviour is causing prices to creep up.

"This behaviour drives up the price of goods. Retailers identify a demand that they can't meet, so they rush to get resupplied, which means paying more for container space, which they will inevitably pass onto the consumer."

The phenomenon may not be limited to consumer purchases. According to data released last month by Dutch ecommerce software company Sana Commerce, the same trend may be happening with wholesale purchasing too. Sana Commerce provides software for B2B web stores around the world. Their aggregated data indicates that the average order value jumped by 42% in March.

Michiel Schipperus, CEO of Sana Commerce
Michiel Schipperus, CEO of Sana Commerce

Michiel Schipperus, CEO of Sana Commerce, believes wholesale buyers may be being affected by a similar psychological bias that affects consumers. "In the lead up to March, the average order value per customer was pretty steady. But we did notice a peak in March, with the average order value rising by 42% compared to February 2022. This is a very significant increase month over month. In April, the average order value steadied again."

This significant drop-off in orders suggests that something was happening to encourage businesses, regardless of location or sector, to bulk their regular orders out. While Schipperus is reluctant to attribute the spike to anything specific, this data is consistent with other global commerce trends that occurred as a result of the Russian invasion of Ukraine. Oil prices jumped, so did 'pig iron', nickel and aluminium.

"This aggregated data includes the activity of B2B e-commerce web stores that use Sana Commerce software. These web stores are from businesses all around the world and across industries. They're a good indicator of the trends and patterns in buying decisions by the largest businesses in the world," concluded Schipperus.

Shortages affect the perceived value of goods. This is why used car prices are rising and in some cases exceeding the cost of new cars. "The semiconductor chip shortage was a growing issue that Coronavirus finally pushed over the edge," explains Robert Matthams, founder of online transport marketplace Shiply.

"As long as supply chain issues continue in the auto industry, we expect to see more and more consumers looking to the second-hand market for cars and for the second-hand market to keep on increasing ."

Organisational psychologist Professor Sir Cary Cooper believes that consumption habits are becoming harder for wholesalers and retailers to predict.

"Scarcity, or perceived scarcity, is a powerful driver of behaviour. That's why people and even nation states fight over resources. When it comes to consumer behaviour, hoarding or panic buying is perhaps the most extreme response to scarcity. Slightly lower on the scale of intensity is the behaviour being reported now; people aren't trying to hoard for survival, but they are accumulating for convenience.

Professor Cooper, who advises large organisations on the psychological impact of their decision-making, believes social media may be having an impact on buying patterns.

"Social media can sometimes play an important role in this. Even when people can see well-stocked shelves in front of their eyes, if they're also seeing images on social media - even fake images - that depict empty shelves elsewhere, there's a feeling that scarcity is contagious and the drive to accumulate resources increases. That's when people abandon their normal buying behaviours."

As well as affecting consumer behaviour, social media - combined with a healthy dose of opportunism - is proving to be capable of influencing individual supply chain decisions at the micro level. Speaking recently to a UK-based business blog, Shuan Maroof, founder of Noho Home, an online luxury furniture retailer, discussed how social media influencers were indirectly influencing his business' logistics and planning resources by requesting free 'samples' of products.

"We sell luxury, high-spec beds and sofas that can retail for up to £5,000, as well as homeware, art and accessories, explained Maroof.

Enyo Bed
Enyo Bed

"These products can be really expensive to ship. Not to mention the wholesale cost of the products themselves. It's not that we're anti-influencer, but some of them don't seem to appreciate the time, effort and money that goes into creating desirable products."

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