“DOOM SPENDING” — DOOMSDAY DEALS — HOW FEAR IS SHAPING THE WAY WE SHOP!
Overall Sales are Up? It’s Retail Therapy! It’s a Hedge! From hoarding toilet paper to eggs, it isn’t necessarily rational..
KEY POINTS
CNBC reported overall sales ticked up, despite the tough economic forces. Some of this may be related to doom spending.
Doom spending can involve hedging, to get in front of what some believe may be even higher prices in the future.
Fear spending can lead to increased debt levels — in a vicious circle/loop, putting even more pressures on the individual, and the economy.
What is Doom Spending?
McKinsey defines doom spending as the act of shopping as a means to assuage mounting anxiety over what the future may hold.
Economic concerns are one such example. Political worries are another. Of course those are intertwined.
CNBC reports that such spending can act as a sort of retail salve or therapy. It can also be a strategy to get ahead of economic uncertainty.
Doom spending is often hasty, impulsive, and not necessarily rational.
As an example, hedge-buying paper products, and other basics, as was done during COVID-19, or egg-hoarding, as of late.
The US consumer outlook hit a 12-year low in March (The Conference Board).
A fresh reading from the University of Michigan depicted a deterioration in overall consumer sentiment, with a 12% drop from February, marking the third month of decline.
CNBC reported an uptick in overall sales, despite the market meltdown.
Vicious Circle
Roughly 1 in 5 Americans are shopping out of fear of future price hikes, dubbed “doom shopping”.
These “doomsday” purchases can act as a hedge: “I don’t really have the money, but I better get the item now, before prices go up even more.”
Such behaviors can also act as a control mechanism, “I’m feeling unsettled with this crazy market, but I do have agency over how I spend my money.”
Doom shopping can lead to overspending, which can increase demand that suppliers cannot meet, which in turn can lead to higher prices.
“People are worried for a number of reasons," Wendy De La Rosa, a Wharton Marketing professor, who studies consumer behavior, told CNBC. "We as humans hate uncertainty and are averse to volatility.”
“And so when there's whiplash happening at a national level as to what tariffs are happening with which country and how it's going to affect our domestic industries, that makes people really nervous.”
De La Rosa: “Consumer sentiment is oftentimes more predictive than people's objective financial situation.”
So the thinking goes, “I fear the future, so I’m going to buy, even if I don’t have the money to do so.”
Findings from Creditcards.com:
1 in 5 Americans are buying more than usual, most driven by Trump’s tariffs.
3 in 10 Americans are purchasing items in preparation for another pandemic.
42% of Americans are or will start stockpiling items, mainly food and toilet paper.
1 in 4 Americans have made large purchases since November, in fear of Trump’s tariffs.
23% of Americans expect to worsen or go into credit card debt this year.
Consumers aren’t the only ones roiling.
The markets are way down — the S&P SPX Index slid nearly 5% post-Liberation Day on April 3, and is down 8.25%, year-to-date.
The Fed is holding, but watchful, and major retailers, such as Best Buy and Walmart, are all signaling uncertainty.
Walmart
Walmart is an economic bellwether with its massive size and scale.
The retailer announced fiscal fourth quarter earnings on February 20, 2025. It was announced that profit growth would be slower than expected in the upcoming months.
During the earnings call, the CFO was quoted as saying, “It’s prudent to have an outlook that is somewhat measured.”
Walmart stock is down 8% year-to-date. It was down 5% on April 4, alone.
One of the other downsides of "Doom Spending" is the whiplash effect after things settle down. That kind of spending is not sustainable. Retailers that don't take that into effect will find themselves way overbought, leading to significant discounts to purge excess inventory. It can be a double whammy. I didn't anticipate the volatility, so I sold out, and then I built a plan on artificial demand, which causes me to have too much inventory. That challenge is 100% avoidable if you understand "Doom Spending" and plan accordingly.