It isn’t really about hoarding. And there isn’t an easy fix.
Around the world, in countries afflicted with the coronavirus, stores are sold out of toilet paper. There have been shortages in Hong Kong, Australia, the United Kingdom, and the United States. And we all know who to blame: hoarders and panic-buyers.
Well, not so fast.
Story after story explains the toilet paper outages as a sort of fluke of consumer irrationality. Unlike hand sanitizer, N95 masks, or hospital ventilators, they note, toilet paper serves no special function in a pandemic. Toilet paper manufacturers are cranking out the same supply as always. And it’s not like people are using the bathroom more often, right?
U.S. Health Secretary Alex Azar summed up the paradox in a March 13 New York Times story: “Toilet paper is not an effective way to prevent getting the coronavirus, but they’re selling out.” The president of a paper manufacturer offered the consensus explanation: “You are not using more of it. You are just filling up your closet with it.”
Faced with this mystifying phenomenon, media outlets have turned to psychologists to explain why people are cramming their shelves with a household good that has nothing to do with the pandemic. Read the coverage and you’ll encounter all sorts of fascinating concepts, from “zero risk bias” to “anticipatory anxiety.” It’s “driven by fear” and a “herd mentality,” the BBC scolded. The libertarian Mises Institute took the opportunity to blame anti-gouging laws. The Atlantic published a short documentary harking back to the great toilet paper scare of 1973, which was driven by misinformation.
No doubt there’s been some panic-buying, particularly once photos of empty store shelves began circulating on social media. There have also been a handful of documented cases of true hoarding. But you don’t need to assume that most consumers are greedy or irrational to understand how coronavirus would spur a surge in demand. And you can stop wondering where in the world people are storing all that Quilted Northern.
There’s another, entirely logical explanation for why stores have run out of toilet paper — one that has gone oddly overlooked in the vast majority of media coverage. It has nothing to do with psychology and everything to do with supply chains. It helps to explain why stores are still having trouble keeping it in stock, weeks after they started limiting how many a customer could purchase.
In short, the toilet paper industry is split into two, largely separate markets: commercial and consumer. The pandemic has shifted the lion’s share of demand to the latter. People actually do need to buy significantly more toilet paper during the pandemic — not because they’re making more trips to the bathroom, but because they’re making more of them at home. With some 75% of the U.S. population under stay-at-home orders, Americans are no longer using the restrooms at their workplace, in schools, at restaurants, at hotels, or in airports.
Georgia-Pacific, a leading toilet paper manufacturer based in Atlanta, estimates that the average household will use 40% more toilet paper than usual if all of its members are staying home around the clock. That’s a huge leap in demand for a product whose supply chain is predicated on the assumption that demand is essentially constant. It’s one that won’t fully subside even when people stop hoarding or panic-buying.
If you’re looking for where all the toilet paper went, forget about people’s attics or hall closets. Think instead of all the toilet paper that normally goes to the commercial market — those office buildings, college campuses, Starbucks, and airports that are now either mostly empty or closed. That’s the toilet paper that’s suddenly going unused.
So why can’t we just send that toilet paper to Safeway or CVS? That’s where supply chains and distribution channels come in.
Not only is it not the same product, but it often doesn’t come from the same mills.
Talk to anyone in the industry, and they’ll tell you the toilet paper made for the commercial market is a fundamentally different product from the toilet paper you buy in the store. It comes in huge rolls, too big to fit on most home dispensers. The paper itself is thinner and more utilitarian. It comes individually wrapped and is shipped on huge pallets, rather than in brightly branded packs of six or 12.
“Not only is it not the same product, but it often doesn’t come from the same mills,” added Jim Luke, a professor of economics at Lansing Community College, who once worked as head of planning for a wholesale paper distributor. “So for instance, Procter & Gamble [which owns Charmin] is huge in the retail consumer market. But it doesn’t play in the institutional market at all.”
Georgia-Pacific, which sells to both markets, told me its commercial products also use more recycled fiber, while the retail sheets for its consumer brands Angel Soft and Quilted Northern are typically 100% virgin fiber. Eric Abercrombie, a spokesman for the company, said it has seen demand rise on the retail side, while it expects a decline in the “away-from-home activity” that drives its business-to-business sales.
In theory, some of the mills that make commercial toilet paper could try to redirect some of that supply to the consumer market. People desperate for toilet paper probably wouldn’t turn up their noses at it. But the industry can’t just flip a switch. Shifting to retail channels would require new relationships and contracts between suppliers, distributors, and stores; different formats for packaging and shipping; new trucking routes — all for a bulky product with lean profit margins.
Because toilet paper is high volume but low value, the industry runs on extreme efficiency, with mills built to work at full capacity around the clock even in normal times. That works only because demand is typically so steady. If toilet paper manufacturers spend a bunch of money now to refocus on the retail channel, they’ll face the same problem in reverse once people head back to work again.
“The normal distribution system is like a well-orchestrated ballet,” said Willy Shih, a professor at Harvard Business School. “If you make a delivery to a Walmart distribution center, they give you a half-hour window, and your truck has to show up then.” The changes wrought by the coronavirus, he said, “have thrown the whole thing out of balance, and everything has to readjust.”
While toilet paper is an extreme case, similar dynamics are likely to temporarily disrupt supplies of other goods, too — even if no one’s hoarding or panic-buying. The CEO of a fruit and vegetable supplier told NPR’s Weekend Edition that schools and restaurants are canceling their banana orders, while grocery stores are selling out and want more. The problem is that the bananas he sells to schools and restaurants are “petite” and sold loose in boxes of 150, whereas grocery store bananas are larger and sold in bunches. Beer companies face a similar challenge converting commercial keg sales to retail cans and bottles.
I’m absolutely convinced that very little was triggered by hoarding.
It’s all happening, of course, against the backdrop of a pandemic that makes it hard enough for these producers to keep up business as usual, let alone remold their operations to keep up with radical shifts in demand.
If there’s any good news, it’s that we can stop blaming these shortages on the alleged idiocy of our fellow consumers. “I’m absolutely convinced that very little was triggered by hoarding,” Luke said. Even a modest, reasonable amount of stocking up by millions of people in preparation for stay-at-home orders would have been enough to deplete many store shelves. From there, the ripple effects of availability concerns, coupled with a genuine increase in demand due to people staying in, are sufficient to explain the ongoing supply problems.
In the long run, the industry is still optimistic that it can adapt. “We’ve got fiber supply, we’ve got trees,” said Georgia-Pacific’s Abercrombie. “It’s just a matter of making the product and getting it out.”
In the meantime, some enterprising restaurateurs have begun selling their excess supplies of toilet paper, alcohol, and other basics. Last week I picked up takeout at a local restaurant with a side of toilet paper and bananas. The toilet paper was thin and individually wrapped. The bananas were puny. They’ll do just fine.
On March 1, the day after the first coronavirus death in the United States was announced, brothers Matt and Noah Colvin set out in a silver S.U.V. to pick up some hand sanitizer. Driving around Chattanooga, Tenn., they hit a Dollar Tree, then a Walmart, a Staples and a Home Depot. At each store, they cleaned out the shelves.
Over the next three days, Noah Colvin took a 1,300-mile road trip across Tennessee and into Kentucky, filling a U-Haul truck with thousands of bottles of hand sanitizer and thousands of packs of antibacterial wipes, mostly from “little hole-in-the-wall dollar stores in the backwoods,” his brother said. “The major metro areas were cleaned out.”
Matt Colvin stayed home near Chattanooga, preparing for pallets of even more wipes and sanitizer he had ordered, and starting to list them on Amazon. Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic.
Now, while millions of people across the country search in vain for hand sanitizer to protect themselves from the spread of the coronavirus, Mr. Colvin is sitting on 17,700 bottles of the stuff with little idea where to sell them.
“It’s been a huge amount of whiplash,” he said. “From being in a situation where what I’ve got coming and going could potentially put my family in a really good place financially to ‘What the heck am I going to do with all of this?’”
Mr. Colvin is one of probably thousands of sellers who have amassed stockpiles of hand sanitizer and crucial respirator masks that many hospitals are now rationing, according to interviews with eight Amazon sellers and posts in private Facebook and Telegram groups from dozens more. Amazon said it had recently removed hundreds of thousands of listings and suspended thousands of sellers’ accounts for price gouging related to the coronavirus.
Amazon, eBay, Walmart and other online-commerce platforms are trying to stop their sellers from making excessive profits from a public health crisis. While the companies aimed to discourage people from hoarding such products and jacking up their prices, many sellers had already cleared out their local stores and started selling the goods online.
Now both the physical and digital shelves are nearly empty.
Mikeala Kozlowski, a nurse in Dudley, Mass., has been searching for hand sanitizer since before she gave birth to her first child, Nora, on March 5. When she searched stores, which were sold out, she skipped getting gas to avoid handling the pump. And when she checked Amazon, she couldn’t find it for less than $50.
“You’re being selfish, hoarding resources for your own personal gain,” she said of the sellers.
Sites like Amazon and eBay have given rise to a growing industry of independent sellers who snatch up discounted or hard-to-find items in stores to post online and sell around the world.
These sellers call it retail arbitrage, a 21st-century career that has adults buying up everything from limited-run cereals to Fingerling Monkeys, a once hot toy. The bargain hunters look for anything they can sell at a sharp markup. In recent weeks, they found perhaps their biggest opportunity: a pandemic.
As they watched the list of Amazon’s most popular searches crowd with terms like “Purell,” “N95 mask” and “Clorox wipes,” sellers said, they did what they had learned to do: Suck up supply and sell it for what the market would bear.
Initially, the strategy worked. For several weeks, prices soared for some of the top results to searches for sanitizer, masks and wipes on Amazon, according to a New York Times analysis of historical prices from Jungle Scout, which tracks data for Amazon sellers. The data shows that both Amazon and third-party sellers like Mr. Colvin increased their prices, which then mostly dropped when Amazon took action against price gouging this month.
At the high prices, people still bought the products en masse, and Amazon took a cut of roughly 15 percent and eBay roughly 10 percent, depending on the price and the seller.
Then the companies, pressured by growing criticism from regulators and customers, cracked down. After the measures last week, Amazon went further on Wednesday, restricting sales of any coronavirus-related products from certain sellers.
“Price gouging is a clear violation of our policies, unethical, and in some areas, illegal,” Amazon said in a statement. “In addition to terminating these third party accounts, we welcome the opportunity to work directly with states attorneys general to prosecute bad actors.”
Mr. Colvin, 36, a former Air Force technical sergeant, said he started selling on Amazon in 2015, developing it into a six-figure career by selling Nike shoes and pet toys, and by following trends.
In early February, as headlines announced the coronavirus’s spread in China, Mr. Colvin spotted a chance to capitalize. A nearby liquidation firm was selling 2,000 “pandemic packs,” leftovers from a defunct company. Each came with 50 face masks, four small bottles of hand sanitizer and a thermometer. The price was $5 a pack. Mr. Colvin haggled it to $3.50 and bought them all.
He quickly sold all 2,000 of the 50-packs of masks on eBay, pricing them from $40 to $50 each, and sometimes higher. He declined to disclose his profit on the record but said it was substantial.
The success stoked his appetite. When he saw the panicked public starting to pounce on sanitizer and wipes, he and his brother set out to stock up.
Elsewhere in the country, other Amazon sellers were doing the same.
Chris Anderson, an Amazon seller in central Pennsylvania, said he and a friend had driven around Ohio, buying about 10,000 masks from stores. He used coupons to buy packs of 10 for around $15 each and resold them for $40 to $50. After Amazon’s cut and other costs, he estimates, he made a $25,000 profit.
Mr. Anderson is now holding 500 packs of antibacterial wipes after Amazon blocked him from selling them for $19 each, up from $16 weeks earlier. He bought the packs for $3 each.
Eric, a truck driver from Ohio who spoke on the condition that his surname not be published because he feared Amazon would retaliate, said he had also collected about 10,000 masks at stores. He bought each 10-pack for about $20 and sold most for roughly $80 each, though some he priced at $125.
“Even at $125 a box, they were selling almost instantly,” he said. “It was mind-blowing as far as what you could charge.” He estimates he made $35,000 to $40,000 in profit.
Now he has 1,000 more masks on order, but he’s not sure what to do with them. He said Amazon had been vague about what constituted price gouging, scaring away sellers who don’t want to risk losing their ability to sell on its site.
To regulators and many others, the sellers are sitting on a stockpile of medical supplies during a pandemic. The attorney general’s offices in California, Washington and New York are all investigating price gouging related to the coronavirus. California’s price-gouging law bars sellers from increasing prices by more than 10 percent after officials declare an emergency. New York’s law prohibits sellers from charging an “unconscionably excessive price” during emergencies.
An official at the Washington attorney general’s office said the agency believed it could apply the state’s consumer-protection law to sue platforms or sellers, even if they aren’t in Washington, as long as they were trying to sell to Washington residents.
Mr. Colvin does not believe he was price gouging. While he charged $20 on Amazon for two bottles of Purell that retail for $1 each, he said people forget that his price includes his labor, Amazon’s fees and about $10 in shipping. (Alcohol-based sanitizer is pricey to ship because officials consider it a hazardous material.)
Current price-gouging laws “are not built for today’s day and age,” Mr. Colvin said. “They’re built for Billy Bob’s gas station doubling the amount he charges for gas during a hurricane.”
He added, “Just because it cost me $2 in the store doesn’t mean it’s not going to cost me $16 to get it to your door.”
But what about the morality of hoarding products that can prevent the spread of the virus, just to turn a profit?
Mr. Colvin said he was simply fixing “inefficiencies in the marketplace.” Some areas of the country need these products more than others, and he’s helping send the supply toward the demand.
“There’s a crushing overwhelming demand in certain cities right now,” he said. “The Dollar General in the middle of nowhere outside of Lexington, Ky., doesn’t have that.”
He thought about it more. “I honestly feel like it’s a public service,” he added. “I’m being paid for my public service.”
As for his stockpile, Mr. Colvin said he would now probably try to sell it locally. “If I can make a slight profit, that’s fine,” he said. “But I’m not looking to be in a situation where I make the front page of the news for being that guy who hoarded 20,000 bottles of sanitizer that I’m selling for 20 times what they cost me.”
After The Times published this article on Saturday morning, Mr. Colvin said he was exploring ways to donate all the supplies.