Consumer Behavior

Smart inventory strategy in uncertain times: Why panic buying could be hurting your business

Tariff policy will continue evolving, but retailers who respond with strategic discipline rather than reactive stockpiling will be better positioned through ongoing uncertainty.

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October 2, 2025 by Warren Wilbee — CTO, ToolsGroup

Over the past decade, retailers have faced a steady stream of disruptions, from COVID to tariffs and inflation spikes, each triggering waves of uncertainty that led to consumers' panic buying.

In the face of a disruption, many companies have changed their fundamental stance on inventory. They have shifted from 'Just in Time' to 'Just in Case'. This has led to stockpiling inventory at unprecedented levels, in the hope of better managing price hikes and supply chain disruptions. The uncertainty around tariffs in the U..S has reinforced this behavior. In reality, this reactive strategy may be creating bigger, longer-term challenges than the disruptions themselves.

It's understandable, but it's also unsustainable. Instead of reacting out of fear, retailers can adopt more strategic, data-driven alternatives.

When Fear Drives Procurement Decisions

The pattern is consistent across the industry: retailers are dramatically increasing safety stock levels in response to uncertainty. The National Retail Federation reported that companies increased their inventory levels earlier this year by 10–15% during periods of trade uncertainty, requiring substantial capital and storage adjustments.

Executives are wrestling with questions like whether to secure 17 months of inventory versus 24 months, treating procurement more like commodity speculation than strategic planning. These same organizations are simultaneously postponing technology upgrades and strategic initiatives to fund massive inventory investments.

The parallels to consumer behaviors in the early pandemic are striking. Actual supply constraints didn't drive the toilet paper shortage of 2020; it was panic-induced. Today's inventory hoarding follows similar logic, with fear driving decisions rather than data-backed analysis.

From my vantage point as a CTO working with dozens of retailers, I've seen this pattern play out in real time. In one case last year, a client placed huge advance orders to "be safe," only to realize mid-season that demand had shifted completely. By the time they came to us, they weren't asking how to move product faster, but how to undo the financial strain of sitting on so much inventory. The irony was clear: the fear of being caught short had created a bigger problem than the disruption itself.

The 2025 back-to-school season reinforced this lesson. Retailers faced inflation, tariffs, and consumers shopping in phases rather than all at once. Those relying on bulk early orders struggled with mismatched supply, while those adopting AI-driven replenishment adjusted in real time to shifting demand. It was a vivid reminder that resilience doesn't come from overbuying—it comes from agility.

The Capital Allocation Problem

The financial implications extend beyond storage costs. Retailers are committing millions in working capital to inventory that could instead fund growth initiatives, such as technology upgrades, store improvements, or market expansion to drive long-term value creation.

This creates a clear divide in market response. Well-capitalized companies maintain disciplined investment approaches while making measured inventory adjustments. Smaller, privately-owned retailers often pause all strategic projects to fund inventory stockpiles, creating competitive disadvantages that extend well beyond any times of uncertainty.

I've watched this trade-off firsthand. More than once, a retailer has put a supply chain technology project on hold to fund a warehouse full of goods "just in case." Yet when demand didn't materialize, they were stuck with aging stock and no improved systems to help them respond better next time. In contrast, the companies that stayed disciplined—investing in forecasting, replenishment, and pricing intelligence—were able to stay agile without draining their capital.

Seasonal buying patterns make this trade-off even sharper. Essentials-only strategies, which grew in 2025 as many households bought just what was needed for the first weeks of school, created multiple smaller demand peaks. Retailers using AI-powered forecasting and replenishment tools could follow those rolling shifts without locking up capital in speculative inventory.

Strategic Alternatives to Panic Buying

A more disciplined approach starts with understanding customer price sensitivity through elasticity testing. Rather than assuming customers will walk away at the first price increase, retailers can test actual tolerance levels for pricing adjustments. Most companies discover their elasticity assumptions are overly conservative. The opportunity cost analysis is crucial.

"Forward buying" offers a strategic alternative to indiscriminate stockpiling. This approach involves purchasing based on confirmed demand signals and validated customer acceptance of price changes, rather than worst-case scenario planning. While requiring more analytical work upfront, it keeps investment aligned with actual business needs.

Building Resilience Over Reactive Measures

Successful retailers are treating tariff uncertainty as a supply chain optimization challenge rather than an existential threat. They're investing in capabilities like demand forecasting improvements, supplier diversification, and supply chain stress-testing to build adaptive capacity.

These companies maintain strategic focus despite external volatility. They understand that sustainable competitive advantage comes from operational capabilities that can respond to changing conditions, not warehouse space filled with speculative inventory.

The most evident proof I've seen comes during seasonal surges. Retailers who had implemented AI forecasting and rolling replenishment cycles didn't panic when consumer behavior shifted mid-season. They adjusted allocations in days, not months. One client even told me that for the first time, their supply chain team felt "ahead of the problem" instead of constantly firefighting. That's what resilience looks like—not more stock, but more confidence in the system guiding your decisions.

The critical question isn't "how much inventory should we stockpile before tariffs increase?" but rather "how can we build business resilience while maintaining growth investments?" The answer invariably involves better demand intelligence, strategic supplier relationships, and disciplined capital allocation.

Tariff policy will continue evolving, but retailers who respond with strategic discipline rather than reactive stockpiling will be better positioned through ongoing uncertainty.

About Warren Wilbee

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