Panic Buying of a Different Kind

Craig was at the Apple Store to get his daughter’s laptop fixed. But with tariffs expected to kick in before the latest iPhone models are released later this year, he figured he might as well get a new phone, too. And if he was getting a new phone for himself, he might as well get two more, for his wife and daughter. 

Fearing that tariffs are going to send already high prices even higher, people are stocking up on everything from appliances and electronics to toys and even food. Leaders in consumer goods, retail, and other industries say they’re seeing growing evidence of “panic buying” over the last month—just as they did during the pandemic. But the key difference this time around is that cost concerns, not shortages, are driving the buying, says Craig Rowley, a senior client partner in the Consumer Markets practice at Korn Ferry. He says panic buying out of want rather than need complicates the management of inventory levels, which represents the biggest cost for consumer-goods companies. “It’s hard to predict what the buy forward will be and how that will impact supply needs later,” says Rowley.

Put another way, instead of waiting six months for new versions of products to be released, people are replacing them now. For tech and other companies that thrive on product-release cycles, panic buying now could hurt financial performance later. Think about how retailers, particularly online, overperformed during the first two years of the pandemic, only to struggle during the last two. Rowley says the potential for an economic slowdown in the second half of the year could make that dynamic even more pronounced this time around. “Leaders need to figure out how much more inventory they need now,” he says, “and figure out how much less they are going to need in the future.”

Complicating matters further is the fact that leaders have moved away from “just in time" inventory management, in which products are only ordered as needed, in part because this approach led to supply-chain-driven shortages the last time around. In fact, they have been doing just the opposite, building inventories of supplies and products in advance of tariffs, says Sean McBurney, sector leader for the North America Food and Agribusiness practice at Korn Ferry. More manufacturing and production is taking place domestically as well, adds McBurney, allowing for more agility to ratchet up or tamp down inventory.

At the same time, firms have accelerated the digital transformation of supply chains since the pandemic. “They can be much more responsive to sudden changes in inventory flows due to things like tariffs than last time,” McBurney says. That’s where data and AI advances can make a big difference, says Jonathan Wildman, a senior client partner with Korn Ferry Advisory. He says data from inventory-sensing and -monitoring systems and AI-assisted model-building and forecasting is critical to making timely decisions in a volatile and unpredictable environment. “Companies act too fast or too slow most often because they don’t have the right data-collection methods in place, or because the methods are not gathering and processing information fast enough,” says Wildman. 

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