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Of Toilet Paper And Coronavirus

Of #ToiletPaperGate #ToiletPaper

They’re trending across social media.

We thought it would be masks and latex gloves flying off the shelves.

Instead, it is toilet paper.

Anxieties about the toilet paper crisis led Australia’s NT News to print eight blank pages for readers to use if they don’t have toilet paper. (not recommended for use)

The supply chain for toilet paper across the world has been interrupted after Twitter users shared videos of empty toilet paper shelves.

Why all the hubbub?

Because social media has the potential to impact markets.

I just heard on the streets today two young men discussing how Costco had run out toilet paper. Videos like this appear online:

Professor Justin Wolfers, an economist at the University of Michigan, said people are buying toilet paper out of the fears others will buy it all up before they do.

It’s not like toilet paper cures Coronavirus, after all.

“My argument is simply that panic buying can be rational,” Wolfers told Forbes. “There is nothing inherent in markets that prevents this.”

Amid the panic, toilet paper isn’t the only winner.

Oliver Chen, a retail analyst at Cowen in New York, noted virus-driven panic buying has increased demand for curbside services.

Companies such as Target and Walmart stand as the beneficiaries of toilet paper gate.

Target reported in an earnings call that customers who try the service increase spending at Target by 25%, with 10% to 11% of shoppers using the service.

“When you use the curbside service, it increases your loyalty as a shopper,” argues Chen, who sees panic buying increasing sales by 1% to 2% in the first quarter wherever groceries and staples are sold. Paltry 3% to 7% margins leave any sales increase desired.

Sucharita Kodali, an analyst at Forrester, suggests retailers mismanaged toilet paper gate.

“What should have been a winning lottery ticket these guys were handed, they basically squandered,” she says. “A lot of retailers foolishly let that opportunity pass.”

(State price-gouging laws bar increases of 10% or more only in an official state of emergency. Retailers are less willing to raise prices than to lower them. )

“Costco’s implicit promise to the customer is, ‘We will never screw you,’” says Wolfers. “Raising prices on toilet paper would destroy that trust.”

Costco’s February 2020 sales reportedly increased 13.8% over the previous year due to “concerns over the coronavirus,” anyway.

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