Pre-Hurricane Consumer Stockpiling and Post-Hurricane Product Availability: Empirical Evidence from Natural Experiments
56 Pages Posted: 12 Jan 2019 Last revised: 12 Mar 2020
Date Written: March 10, 2020
The provision of essential supplies is a key service provided by retailers when demand spikes due to consumer stockpiling during environmental emergencies. Moreover, it is important for retailers to quickly recover from these events by replenishing the stock of essential supplies to meet the continuing needs of local residents. As exogenous events, hurricanes provide natural experiments to test retail operational performance in the face of environmental emergencies. The main purpose of this research is to determine how consumer stockpiling (or precautionary buying) behavior, as well as storm and retail characteristics, impact the availability of essential supplies at retailers following a hurricane. We study consumer stockpiling behavior prior to the onset of hurricane landfalls, and determine the impact of this behavior on in-store product availability for various formats of retail store outlets. Specifically, we focus on the bottled water product category, an essential emergency category in hurricane preparedness. On average, consumers stock 58% more bottled water than regular purchases before hurricanes approach. This study combines an event analysis methodology with econometric models using archival retail scanner data from 60 U.S. retail chains located in 963 counties and real-time data from four recent U.S. continental hurricanes. We find that supply-side characteristics (retail network and product variety), demand-side characteristics (hurricane experience and household income), and disaster characteristics (hazard proximity and hazard intensity) significantly affect consumer stockpiling propensity as the hurricanes approach. The increased consumer stockpiling has immediate and longer-term impacts on retail operations, namely, in-store product availability. Among various retail formats, drug stores are associated with the highest consumer stockpiling propensity before hurricanes, while dollar stores and discount stores are associated with the lowest in-store product availability following hurricanes. Our study points to the need for retailers and policymakers to carefully monitor factors affecting consumer stockpiling behavior that will allow for better allocation of critical supplies during the hurricane season.
Keywords: product availability, consumer stockpiling, hurricane disasters, natural experiment
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