Demand Trends and Consumer Behaviour

In this post I’m going to explore a few demand trends I’ve noticed. Demand effects pretty much everything you do to make money online. It determines your stock levels, your sell price, your profits and ultimately your business’s success. Matching supply with demand is every seller’s biggest challenge. Demand TrendsDemand is this funny variable that never stays constant and is incredibly hard to predict accurately. That said, there are certain trends that demand tends to follow. These trends are based on consumer behaviour. I will touch on a couple of trends I’ve noticed along the way and I encourage you to post any relevant demand trends you have come across as comments.

Consumer Behaviour

Consumer behaviour is a term used to try predict when and how much your potential customer will buy and what influences their decision. Knowing your consumer’s behaviour will give you a good understanding of demand. A good way to attempt to predict consumer behaviour is to look at past demand trends and determine major factors that influence purchasing habits. Here are two significant ones I’ve noticed:

  • Public Holidays – I have found that consumers are less likely to buy physical products just before, during, and just after public holidays. I would put this down to fact that public holidays tend to have their own set of expenses and events that take away from a customer’s normal purchasing habit. The obvious exceptions to this is public holidays that promote gift giving, such as Christmas, and if you sell products that are particularly targeted at a public holiday, such as Easter bunny toys. Apart from these exceptions, I’ve found that the 3 to 4 days before and after a public holiday tend to be much quieter than normal.
  • Seasonal Trends – I have found that there are certain months that consumers are more likely to buy physical products. In general, I’ve found that mid Jan through to end of March is much quieter than usual. Potential reasons for this is: customers have just spent a lot of money during the holiday season and are in saving mode, or customers have made a new year’s resolution to save better or spend money in other areas such as health and fitness. It normally takes a month or two to snap out of this lull. March has yet another factor in that it is tax time in the US, meaning people are more aware of their spending habits and tend to reign it in. On the flip side, Sept through to Dec tend to have higher sales than usual. Whilst Nov and Dec have the simple explanation that everyone is in spending mode in the lead up to the holiday season, I don’t have a great explanation for Sept and Oct being so good. It may be that potential customers are more willing to spend after restricting their spending habit for the majority of the first half of the year. Another reason may be that children go back to school, giving parents the time to shop. The first half of Jan tends to be okay sales wise possibly due to overspill of the spending mode during holiday season. I do not have direct experience, however I have heard from colleagues that information products do not suffer as much from seasonal trends, in particular not experiencing as much of a lull from mid Jan through to March.

I’ve touched on a couple of points above however there are many more variables that effect consumer behaviour and demand, hence it is so hard to predict. There are great, somewhat complex, formulas to predict demand within a couple of standard deviations based on past information, however this requires some proper teaching of how to use models based on past data. These models can even unearth seasonal trends when analysed properly. That however is two subjects in an MBA or Masters in Data Analysis degree, which in my opinion is overkill for online sellers that are only starting out with one or two products.

How to use this information

Okay, so now you know a couple of trends, but what do you do with this knowledge? Demand trends are super useful. Here are a couple of ways you can make use of trends that you’ve noticed for your product:

  • Control stock levels – Ensure you have sufficient stock during the busy months. Make sure you do not over-order and sit on a large pile of stock during slow months. Even Amazon has a stock keeping fee that will sting if you are not making sales.
  • Profitability calculations – Understanding trends will help you better estimate your profits and performance. If you thought the busy period was normal, you would grossly overestimate your profits; vice versa if you thought the slow periods were normal.
  • Pricing and promotions – You can utilise busy periods to ensure you keep your price at a premium as demand is high during this time. You may wish to discount or promote your product more during slow periods to ensure you are still turning over an adequate amount of stock.

Hope you find these demand trends helpful. Make sure you observe your sales patterns and try unearth trends that are more specific to your own product. There may be micro trends that you stumble on. The most important thing however is that you make use of this knowledge to maximise your profits and sales by taking the appropriate action. Again, if anyone has noticed any general trends, please feel free to share it as a comment. I believe it would be super helpful for everyone reading.