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Does rationing essential goods help to prevent panic buying and shortages?

Reports of panic buying before lockdown in March led some supermarkets to limit how much shoppers could buy on each transaction. But since higher demand was driven mainly by people buying more frequently, such limits are unlikely to prevent future shortages of essential goods.

Rapidly rising Covid-19 cases and the expectation of curbs on movement in the early stages of the pandemic led many UK consumers to stock up as a precaution against the need to quarantine or due to supply disruptions. Spending on food staples peaked on 14 March, at over 80% of the daily average in January and February, while spending on household supplies peaked on the same day at over 70% of the daily average earlier in the year. These spikes in spending were driven by many more households than usual buying these products, rather than a small number of people buying extreme amounts.

How can real-time scanner data help us to learn about panic buying during the first wave of the pandemic?

There is a growing body of research studying how consumer spending has changed during the pandemic (for example, Baker et al, 2020; Cox et al, 2020; Hacioglu et al, 2020). Much of this work uses financial transaction data – for example, from bank accounts and budgeting apps – to show how expenditures on broad categories have evolved. Several studies have documented the spike in grocery spending that preceded the introduction of restrictions in various countries.

There is much less work describing the products that experienced the biggest demand spikes, nor the changes in purchasing behaviour that led to those spikes. The prospect of further lockdowns means that additional bouts of hoarding are a distinct possibility – for policy to respond adequately to this, it is vital that we understand the nature of hoarding during the first wave of coronavirus.

Scanner data, in which a large sample of households record purchases of grocery products, allow us to do this. These data contain information on exactly which products were bought, how many packs households purchased and whether they bought anything else on that day. This data source has proved valuable in measuring inflation in real-time during the crisis (Jaravel and O’Connell, 2020).

Which products were most affected?

Figure 1 uses scanner data for the UK from Kantar FMCG (‘fast-moving consumer goods’) Purchase Panel to show how spending on four groups of products evolved over 2020. Spending on food staples and household supplies peaked just before the UK’s national lockdown on 23 March, while spending on discretionary calories and perishable foods increased more slowly and persisted into the lockdown period.

Figure 1: Spending on grocery products over 2020

Figure showing spending on grocery products

Source: Institute for Fiscal Studies analysis using Kantar Worldpanel data

Figure 2 shows the percentage increase in the quantity bought in the four weeks leading up to lockdown, relative to the same period in 2019, for the 30 product categories that saw the largest increases in demand.

Figure 2: Increase in quantity purchased for the 30 most affected categories

Figure showing increase in quantity purchased

Source: Institute for Fiscal Studies analysis using Kantar Worldpanel data

There were 30 categories that experienced a spike in demand of more than 25%. The quantity of soap bought doubled, and purchases of soup, tissues, rice and cleaning products increased by more than 50%.

Figure 2 also breaks down the quantity increase into the portion attributable to people buying more often versus people buying larger quantities. On average, across these categories, higher purchase frequency accounted for 70% of the overall spike in demand.

In other words, the huge increase in demand for certain products was driven not by a few extreme purchasers, but by many more households than usual choosing to buy these products. This is in line with panic buying in different settings – for example, following the 2011 earthquake in Japan (Hori and Iwamoto, 2014).

        Related question: What should we do about price gouging?

Were some types of households more likely to stock up than others?

Hoarding of essential supplies was widespread and prevalent across demographic groups. But the average increase was substantially bigger for households of higher socio-economic status. The greater propensity to stock up among wealthier households was entirely driven by the fact that they increased the likelihood of buying key categories by more, not because they bought excessive amounts.

What are the lessons for policy-makers?

During the period of heightened demand in the run-up to lockdown in March, there were reports of shortages in many stores. This led to calls for policy intervention to tackle the shortages and ensure that everyone, especially the most vulnerable, could access what they need.

In the final few days before lockdown, several supermarkets introduced limits on the number of units of a product that households could buy per transaction. By this point, demand was already returning to normal levels, but a resurgence of case numbers this autumn has led some supermarkets to reintroduce limits.

The study by O’Connell et al (2020) shows that it is unlikely that these limits would have prevented the spikes in demand seen in the run-up to lockdown. If there had been a two-pack limit in place over the entire period, then even assuming that people did not shop more or buy different products, the average increase in quantity in the 30 categories shown in Figure 2 would have been 34%, rather than 44%.

Quantity limits are likely to have had limited impact on hoarding behaviour because most people were buying more frequently, not purchasing excessively large amounts. In addition, O’Connell et al (2020) show that this was not driven by people making more shopping trips, but by people purchasing storable products on their usual trips to the store.

This suggests that further spates of hoarding could still occur, even though households are now shopping less frequently that they did before the pandemic.

What then can be done about shortages arising from heightened demand? Another policy implemented in March was to have dedicated shopping hours for the elderly and other vulnerable consumers. If these were timed to coincide with deliveries of new stock, then this could help to ensure that vulnerable people get the supplies they need.

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Authors: Martin O’Connell, Áureo de Paula and Kate Smith
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