Money Talks is a column that explores what happens when business, the economy, and culture collide.
Crises have a way of reshaping behavior in ways that endure long after the trouble has passed. The stock market crash of 1929 scared ordinary Americans out of the stock market for decades. The Great Depression that followed famously instilled habits of thriftiness and caution in an entire generation. 9/11 remade our expectations of what you had to do to get on an airplane or even walk into an office building.
Ever since the coronavirus hit in March, businesses and pundits and social scientists have been speculating about how the pandemic might permanently alter the economy and society more generally. There are some obvious big structural shifts that may endure: an acceleration of the demise of traditional retail, quicker growth for e-commerce, and more widespread use of remote work. But the pandemic also seems to be reshaping consumer psyches, and therefore consumer habits. In the simplest sense, it’s turning us into a nation of hoarders.
Of course, we all remember that back in March and April, when the pandemic first hit, Americans went on a spree of what was then called “panic buying,” denuding stores of household cleansers, hand sanitizers, milk, fresh vegetables, frozen foods, and, above all, toilet paper. And they bought deep freezers and bigger refrigerators to store all this stuff. Groceries had been the quintessential low-growth business. But Americans bought so much in the early spring that by one measure, they packed eight years of future growth in grocery sales into a couple of months.
The assumption, though, was that this would not last. All of this panic buying was, in effect, pulled forward from the future, which meant that sales of previously in-demand products would fall sharply in the months that followed as people held off buying again until their giant stockpiles were used up. And yet, as it turned out, this didn’t happen.
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To be sure, there were plenty of products that saw sales plateau — like milk. And grocery sales generally saw their pace of growth slow (though not reverse). But the freezer section of supermarket aisles are still often out of stock. Lysol is still running factories 24 hours a day. Clorox sales are still rising quarter over quarter. And while the supply chain issues that made it hard for toilet-paper and paper-towel manufacturers to meet demand have eased, grocery stores in much of the country still have limits on how many packages of paper products you can buy at a time. You aren’t always able to find Bounty at the local Stop & Shop or Kroger — something that would have been unimaginable a year ago. And whenever virus cases spike, store shelves are once again emptied.
Similarly, even as the virus receded over the summer in much of the county, the way Americans have been shopping since March stayed the same: They visited stores less often than before and bought more when they went. That’s why, in the most recent earnings reports from Target and Walmart, and Costco, the size of the average sale was up sharply, even if the number of actual visits wasn’t always rising. Target, for instance, saw the number of customer visits rise 4.5% in the last quarter. But the average ticket was up 15.6%. Walmart’s numbers were even more striking — it saw shopper traffic drop by 14.2%, but the average shopping trip generated 24% more revenue, so that overall revenue still rose briskly. And that revenue gain was propelled by sales of, yes, paper products and household cleaning supplies.
Whenever I go to Walmart or Stop & Shop, my natural reflex has become to toss a package of paper towels in the basket. And I can feel myself getting a little uneasy whenever the number of boxes of pasta in the pantry starts to dwindle.
Of course, we’re still in the middle of the pandemic. But given how much Americans bought in March and April, these continued big sales gains are only possible if, instead of being a transient phenomenon, stockpiling nonperishable goods, and replenishing them regularly, has become a habit for many American shoppers. That’s certainly my experience: Whenever I go to Walmart or Stop & Shop, my natural reflex has become to toss a package of paper towels in the basket. And I can feel myself getting a little uneasy whenever the number of boxes of pasta in the pantry starts to dwindle.
Now, it may well be true that we won’t have 60 rolls of toilet paper in our basements by next May. But the sales numbers and consumer surveys suggest that the new normal won’t look like the old one and that the impulse to keep a stockpile on hand isn’t going to go away when a vaccine arrives. And this is, arguably, a rational response to the pandemic.
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To begin with, one of the things that the advent of the pandemic underscored was the way that lean manufacturing has made the American economy more efficient at the expense of making it resilient in the face of crisis. Manufacturers, understandably, don’t want to maintain massive amounts of unused capacity on the off chance that a pandemic or other crisis will lead to a huge demand spike. Nor do retailers want to keep large amounts of inventory on hand, since that’s an inefficient use of capital. These are rational business decisions. But one consequence is that when demand does spike, shortages are likely.
Consumer capitalism, as exemplified by Walmart and Target and Amazon, has been built on the idea that they’ll always have what you want when you want. The pandemic disrupted that sense of certainty.
Consumer capitalism, as exemplified by Walmart and Target and Amazon, has been built on the idea that they’ll always have what you want when you want. The pandemic disrupted that sense of certainty. It reminded us that when everyone decides they need toilet paper, or Clorox, is when it’s most likely those things will be out of stock. In effect, we’d gotten used to letting Walmart store our paper towels for us, letting them sit there until we needed them. But maybe it makes more sense to store them ourselves (at least if you live somewhere other than a big city, where apartments are too small to do that).
One way of thinking about what this means is that consumers are extending their time horizons, and being more forward-looking when they shop. Studies of pre-pandemic consumer behavior found that American consumers, in general, had relatively short time horizons: Even when they bought in bulk, they tended to look out only a few weeks at most when shopping. Now, they’re looking out months. Of course, you could think of this as just a kind of long-term panic buying. But one person’s panic is another person’s preparation. And Americans are saying that as God as their witness, they’re never going to run out of toilet paper again.