How is 'Doom Spending' & TikTok Impacting Supply Chains?
In the supply chain and procurement space, success often hinges on the ability to forecast demand accurately and respond swiftly to unexpected challenges.
The modern marketplace is increasingly volatile and disruptions are becoming the norm.
However, what many seasoned professionals in the supply chain industry may not have fully appreciated until recently is the significant impact that social media, particularly TikTok, can have on supply chain forecasting and management.
The power of TikTok
The COVID-19 pandemic highlighted the critical role of supply chains while social media, particularly TikTok, surged in influence.
TikTok saw a 654% revenue increase between 2019 and 2020, becoming a key platform for business marketing. Hootsuite projects TikTok will reach 2 billion monthly active users by the end of 2024, with adults spending more time on it than any other app by 2025.
TikTok's impact on consumer behaviour can dramatically alter product demand. A viral TikTok video can cause demand to spike suddenly, catching supply chains off guard.
For instance, in early 2023, a makeup palette inspired by the TV show Euphoria released by an emerging brand went viral on TikTok after a beauty influencer’s tutorial. The hashtag #EuphoriaPaletteChallenge quickly amassed millions of views, driving traffic to the Lemonhead LA website.
Within hours, the palette sold out and overwhelmed the brand’s unprepared supply chain. This led to stockouts, long wait times and negative reviews.
To address these issues, Lemonhead LA scaled up production, invested in advanced inventory systems and improved supplier communication, enhancing their response to viral trends and future demand surges.
The TikTok supply chain
As one Zero100 survey revealed, two-thirds of supply chain professionals believe that digital technology has shifted the balance of power toward demand, leaving supply chains struggling to keep up.
The “TikTok Supply Chain” concept emerges as a solution to this imbalance. This approach involves ingesting and analysing demand data from social media and other digital platforms, enabling supply chains to:
- Enable real-time re-planning: By continuously monitoring social media trends, supply chains can react swiftly to viral demand changes. For example, Nike’s hyper-local stores replace 25% of their footwear every two weeks, based on digital insights from nearby consumers.
- Embed responsiveness into operations: Manufacturing must become hyper-agile, capable of ramping up or down based on digital demand signals. Companies like Prose, which creates custom hair care formulas and John Deere, which uses additive manufacturing for engine parts, demonstrate how dynamic production can meet changing consumer interests.
- Own the supply chain story: Communicating supply chain efforts on social media platforms can help brands shape demand and build consumer trust. Sharing stories about sustainability, transparency and responsiveness can enhance brand reputation and align with consumer values.
The influence of Gen Z and 'doom spending'
Consumer behaviour among Gen Z is adding even more complexity to the marketplace. Faced with economic uncertainty, high living costs and substantial student debt, many Gen Z individuals engage in “doom spending”—impulsively purchasing luxury items, fashion and experiences to manage stress.
Maria Melchor (@firstgenliving) highlights this trend, stating, “When older people ask me how young people are affording nice things that they wouldn’t even buy for themselves, I tell them it’s because we can’t afford anything else. When houses are a million dollars plus, we’re relinquishing any lingering delusions about homeownership.”
Social media platforms like TikTok and Instagram fuel doom spending through trends and hashtags such as #TikTokMadeMeBuyIt, which drives demand for fashion, beauty and tech products.
Doom spending often traps young consumers in debt, especially with Buy-Now-Pay-Later (BNPL) schemes. Almost a third of Gen Z worry about their ability to repay BNPL debts.
Louise Hill, Co-founder and CEO of GoHenry, advises, “All kids and teens need to understand how money and spending is linked to their self-esteem.
"You can’t buy a lifestyle and you won’t feel better about the future by spending too much now. Instead, teach kids that a strong financial future is within their reach by helping them become financially literate. This way, they will have the confidence to save for a range of goals, say no to peer pressure and find better ways to cope when they feel down.”
Despite these issues, over 40% of young people, aged 6-18, report that recent economic challenges have motivated them to save more.
However, the lack of financial education in schools leaves many ill-prepared to manage their finances effectively. Educating Gen Z on financial literacy is crucial for empowering them to make informed spending decisions and mitigate doom spending risks.
Leveraging AI to manage viral demand
To handle the unpredictability of viral demand, companies must enhance supply chain resilience through AI-powered forecasting technology.
By analysing real-time data, including social media trends, customer behaviour and external factors like weather and economic conditions, AI can refine demand forecasting, inventory management and production planning.
For instance, logistics providers can use AI for route optimisation, selecting the most efficient routes based on fuel consumption, canal blockages and geopolitical events. Meanwhile, warehouses can deploy IoT sensors for real-time inventory tracking, offering precise stock visibility.
As social media-driven demand fluctuates rapidly, businesses must adapt with agility in manufacturing and logistics and understand the unique behaviours of Gen Z consumers.
In today’s digital landscape, those who swiftly adapt and integrate AI into their supply chains will transform challenges into growth opportunities.
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