Supply and Demand Dominate the Economy
Supply and demand dominates the economy. People will only buy products that they need and seasons, trends, logistical issues, and availability set the marketplace for these items. For this reason, we are seeing less sales currently and more delays in fulfilling orders. The marketplace is on fire and many companies are struggling to ramp up production to match societies demand. This has a lot of interesting effects on the economy and will continue to be a major factor in the future.
Product Shortages
If we travel back in time, we can look at one consumer product that foreshadowed things to come, toilet paper. At the start of the COVID pandemic, people rushed to the store and pretty quickly there was no toilet paper to be found. This led to two things. First people would buy large quantities of popular products and resold them for a profit online. Secondly, manufacturers increased production to try to keep up with the new demand. As a result of the second action, stores now have plenty of toilet paper; however, the price did increase to help fund the expansion of production. This trend can be seen in many other consumer products as well. Home fitness equipment was sold out everywhere, but now people can usually find what they need in store. Although, similar to the situation with toilet paper prices have gone up. Other consumer products that have seen product shortages and increased prices as a result of the economics conditions of the last year include: computer components, healthcare rated disposable gloves, bicycles, baking ingredient, and furniture. All these, plus many other types of products, continue to increase in price and be difficult to find.
What’s Next?
This question is always a difficult one to answer, but the future of any consumer good producer depends on the current economic climate and the demand for products. This means that there is no right answer because many factors have to be accounted for. Let us look again at the example of toilet paper. Now that it is readily available prices have not been reduced. These companies have found a way to ensure they do not oversaturate the market with goods. This cannot be said for many other businesses. For many it is too early to tell if they have overproduced. We will likely begin to see the effects of a saturated marketplace around Christmas time this year. Companies who have invested heavily in having merchandise in stock will likely start promoting discounts if sales decline. However, this may not be the case for every industry. This is the challenge that investor’s face this year. A successful investor will put their money in a company whose products continue to be in high demand. The worse situation a stock holder can be in is being heavily vested in a company with too much inventory. This will drive costs down and lower their profits. That being said, marketplace demand can be tough to predict.
Playing the Guessing Game
Both dealers, wholesalers, and consumers must play the guessing game when it comes to making purchases. If you buy to early you risk overpaying for a product that’s price may go down in the future due to overstock issues. If you wait too long to make a purchase the item you are seeking might be out of stock and require a long wait time to get. Navigating this difficult marketplace has been the challenge for almost every company over the last year. Businesses want to make money but do not want to end up with a warehouse full of devaluing products. That is why there is long waits to get certain items. Most companies, both big and small, are hedging their bets. They are buying and stocking products they know they will sell and if they sell out they assume the consumer or wholesalers will wait. This has created a boom in the secondary market as well. Prices of used cars have gone up recently as many major companies are limited on inventory. This is just one example that is easy to see on the effect of the current economic situation. Most companies will not put themselves at too much of a financial risk because they do not want to get burned and risk having to shut down based on one bad decision. Additionally, stock market investors are being careful to not put too much money in several risky endeavors. It is a difficulty marketplace to navigate but there is a lot of opportunity. Companies that make good purchasing decisions and investors who put money in the right businesses have the potential to make a lot of money. Just remember there is no risk free investment.
The Future
As we enter the second half of 2021, we must all look to the future. We need to realize eventually production will catch up with demand and is crucial that we do not carried away and produce too much. An abundance of products leads to deflation and a decline in the market. Be careful as we move forward and we must make good investments and good purchasing decisions. It is okay to buy what we need and what we want, but we must do so wisely. If we do not realize the ever changing economy we risk overpaying and ending up with worthless product. In conclusion, be mindful when making a purchase and think about the long term marketplace. It might be best to wait or it might be better to buy everything needed now. That decision depends entirely on the product and service at hand and its demand in the future.