Panic buying happens when consumers buy extremely large amounts of a product before or after a disaster or perceived disaster. This also happens in anticipation of a product shortage or large price increase.
Irrational Panic Buying
With events like natural disasters, such as a pandemic or blizzards, people usually stock up with emergency supplies. It’s rational to prepare for something that looks like it’s going to happen. However, it’s not rational when you buy 500 cans of potted meat for what could likely be a week of isolation.
Irrational stock piling can lead to price gouging. If the price of milk is tripled, it’s seen as a scarce commodity and can lead to anxiety.
Panic starts when negotiation in the brain goes awry. The amygdala, emotional center of the brain, wants us to get out of the way of harm quickly and it doesn’t care how.
The frontal cortex, the behavioral response handler, insists that we think the situation through first.
Sometimes anxiety gets in the way. Rather than talking directly to the brain parts that are good at planning and making decisions, the frontal cortex gets confused by all the cross talk between the brains other parts that are determined to play out all the possible scenarios.
Panic happens when the whole thing short circuits, when the frontal cortex, more rational part of the brain gets overrun by emotion. Fear is so acute, the amygdala takes over and the adrenaline kicks in!
Panic Buying May Help A Little
Sometimes panic can be a lifesaver. If you are in immediate danger, the most rational response can be flight, fight or freeze. You certainly don’t want your brain to spend too much time debating it.
Some anxiety can be good when we face disaster. Fear can be our motivation, raising our energy levels and alertness. It can remind you to social distance, stock up on those essentials and pay attention to the news.
Over the long term, anxiety is a terrible thing to suffer. When we get more anxious, it’s easier for our brains to spiral into panic mode. Chronic stress can actually shrink the part of the brain that helps with reasoning, which can fuel panic even more.
Your body isn’t made for acute stress and anxiety, weeks and months on end. They can both give you short term energy, but eventually leave you depressed and exhausted.
There have been plenty of examples of price gouging amidst the COVID-19 pandemic. A 20 pack of face masks were costing more than $100 on e-commerce sites. The high prices caused companies to put measures in place to stop speculators from taking advantage of a spike in demand. Some businesses removed over 1 million basic needs products for misleading claims and price gouging. Businesses were restricting sales of various items to just two per customer.
There’s A Major Difference In Disaster Preparation And Panic Buying
With hurricanes or blizzards, most people have somewhat of an idea of the items they will need because they live in an area where the threat happens often. Since it was so unclear of the effects of COVID-19, there was a lot of uncertainty driving the spending.
In 1962, nuclear war seemed imminent during the Cuban missile crisis. Families filled their homes with enough bottled water and canned food to survive the atomic blast.
At the turn of the millennium, there was supposed to be a glitch when computers’ internal clocks reset for the year 2000. It was going to send missiles flying and crash global markets. Bottled water and canned foods weren’t all that was being hoarded, money too. The US Treasury printed an extra $50 billion because it was expected that people would stockpile cash.
There Are 4 Reasons Why People Panic Buy During A Crisis.
1. Survival Mode. When a threatening or uncertain situation arises, the primitive part of your brain takes over and its mission is to keep you alive. Rational thinking is suppressed. Even though the government might be promising there will be no disruption in the food supply, people don’t listen.
Since the health crisis was something new, most people weren’t going to take the risk of going hungry.
2. Herd Behavior. The fact that other people were filling their homes with things they don’t need can’t urge you to do the same.
Since everything felt so uncertain, countries closing borders, social isolation, it led people to follow others, even if it didn’t make sense.
3. Scarcity Effect. When products become scarce, it leads people to believe they are more valuable. They are more apt to pay a premium price. Since the item is now worth more, it can make us buy it, even if we don’t want or need it.
That explains why people were scrambling for hand sanitizer. They were even stealing it from other peoples baskets and might have never even used it before.
4. Sense of Control. When things are uncertain, people need to feel they have control over something. If you are looking at an empty aisle, buying up what you can, helps you know that if worse comes to worst, you can still feed your family.
Bulk buying is caused by environmental and psychological cues which throw rational thinking right out the window. In survival mode, we allow our emotions to drive decisions, such as panic buying stocks and are more susceptible to social influence. We rush out and buy more because we believe others are.
Reducing Uncertainty Is The Key To Ensuring That Interventions Work
After weeks of empty shelves, the panic buying phase of the pandemic was over. Product shortages continued to be one of the primary concerns of consumers, especially paper goods and cleaning supplies.
Consumers continued to stock up on food and household supplies to last several weeks. Some were stocking up on prescription medicines. Others were concerned about not being able to get fresh produce.
This new phase is totally different from panic buying. It reflects a lack of control that consumers seek to overcome by fortifying their homes. The new purchase phase is about changing needs and centered on availability.
Consumers are truly needing to buy more than they did before because they are consuming more at home.
In response to COVID-19, there is an elevated in home consumption demand. The demand curve has reshaped to more alcohol, frozen food, laundry detergent and household appliances. There’s less demand for beauty products.
In Conclusion
There’s been a massive mind shift. In 2019, consumers made 1.6 grocery trips per week to the grocery store. Now, they are shopping more on weekday mornings, but only once every two weeks.
The outcome depends on how private companies, social leaders and the government choose to intervene.
The idea that there’s stuff you need that’s not available, but it’s coming, will be consumers reality for a while.
A better plan is to be prepared all year round for possible crises or emergencies. Keep everyone else’s needs in mind as events unfold. Stock up on what you and your family needs, but avoid the urge to hoard.