Effect of product scarcity on purchase decisions and sales

Abstract

As a part of this study, we study the effect of product scarcity on the consumers’ buying behavior. We hypothesize that customers are more likely to buy products that are scarce or available in limited quantity or available within a specific period. As economics frequently shows us that the limited supply results in a favorable situation for businesses. So, one method of sales promotion that can be used and now is being used by modern businesses is to create product scarcity or make it appear scarce. Managers use this technique and create artificial scarcity and influence consumers using phrases like "available till 11:59:59" e.g., ‘Lightening’ deals or "only 2 stocks left" to create a sense of urgency in the minds of the consumer and drive their sales up. Websites like Amazon use tones of data to hyper-personalize the shopping experience and they too leverage this technique. We chose the surveys as a method of research to validate our hypotheses, focusing majorly on the questionnaire approach. The target demographic recognized by us was of urban Millennial and Gen Z consumers. We floated our questionnaire to assist them in self-reporting their insights. Upon the completion of this approach, we found abundant evidence to support our aforementioned hypotheses. We also found ample indications in our secondary research to prove the assumptions, showing that product scarcity can push the consumer to add the item to their cart and translate into sales, thus eventually positively impacting consumer buying behavior. We conclude with recommendations for e-commerce companies to enhance the use of product scarcity and choose the product categories to run this technique based on customer insights.