Blog: Is demand really being destroyed or is it stifled by economic woes?

Is pent-up demand the answer to demand destruction?

That is our topic this week as our strange new bedding world continues to unfold. Brick-and-mortar stores are mostly closed, online stores are open and seeing nice upticks in business, and everyone is wondering when some sense of retail normalcy might return. Alas, there are no sure answers to that pressing question.

In the meantime, let’s consider what the future in Mattressville might look like.

Let’s start with the woeful problem of demand destruction. You have to admit that phrase has a catchy, although scary, sound to it. It’s not a term I’ve used, but it’s one that caught my eye when Stifel analyst John Baugh employed it in a report as the coronavirus pandemic first began dominating headlines last month.

“Clearly demand destruction is the largest concern as it relates to bedding, particularly high-end bedding, which has a closer linkage to the financial meltdown we have witnessed over the last month,” he wrote.

My online story on Baugh’s observations, with “demand destruction” in the headline, got a big response from readers, and that led me to think more about what exactly the term means.

Baugh says it’s really “purchase destruction,” the destruction of sales transactions. That’s a key point because I’m not sure that demand for new bedding is being destroyed: If you need a new bed, you need a new bed, but you might not be able to afford one.

In fact, I could make a case that demand for bedding is actually being created — not destroyed — as families shelter in place. I’m sure that many guest bedroom mattresses are getting much more use than normal, and I bet that many of the people sleeping on them would like beds designed for more comfort and support.

Likewise, I’m sure that many men and women sleeping in their own beds at home are more aware of the importance of those beds. They may be getting more sleep, which would be a good thing in these stressful times, and they are probably more cognizant of how their beds are performing and holding up these days.

Add all those elements add up, and more people probably want new beds now than ever. But the economic meltdown of the coronavirus pandemic has stifled new bed purchases.

Now let’s look at pent-up demand, a phrase that used to be in all bedding marketers’ playbooks. The idea is that when consumers get past the economic worry of the moment, their postponed demand for new beds will drive a nice increase in sales.

There is some evidence for that. Bedding has had some nice bounce backs after down years.

But the current economic climate is like no other, obviously. We’ve never had unemployment at these levels. We’ve never had a worldwide health crisis like this. Consumer confidence is damaged and understandably so.

It’s tempting to think that a wave of pent-up demand will send mattress sales surging later this summer or this fall, or whenever our world starts returning to normal. But this will be a “new normal,” and I think it would be a mistake to assume that the old rules will apply to our new reality.