After over two and a half years of work, I have finished up writing my first book and submitted it to several publishers. In my book I breach the taboo topics of economics and the real world examples that are at work all around us. Economics is not a boring subject, it just happens to get over complicated in boring textbooks by boring teachers. A simple supply and demand chart can explain about any and everything in business and life, and the red-hot fidget spinner craze is no different.
For those that have not thought about economics since you were put to sleep in an intro econ class, it is simple; people want to buy stuff and sellers want to sell stuff. When supply and demand balance we get an equilibrium price, when demand is higher than supply, market prices go up, and when supply goes up, prices fall.
My 8 year old son got his first fidget spinner a few months back, and his 4 year old little brother had to have one as well. I can’t say I blame them, they are fun to play with, and a bit relaxing.
As we went on a family beach getaway for a few days earlier this summer, it seemed like every store marquee along the way was advertising fidget spinners. Only a few short months before our then second-grader started talking about this spinning thing that his friends had. He wanted to use some of his Christmas money to buy one, and we simply could not find a fidget spinner anywhere. Now they seem to be everywhere. This case makes a fascinating real life example of simple economics.
During April, May and Early June anybody with spinners in stock had a monopoly. With a son that just had to have one, the spinners selling on the internet took at least two weeks for delivery while the immediate need to fidget could not wait. Specialty retailers had gross margins of up to 80% on spinners, a number unheard of in specialty retail during the past decade. Every store in the country was being asked if they had spinners in stock. Stores that could get spinners in stock could not keep them on the shelves for long. But that has all changed with increased supply.
In the past few weeks several articles have falsely stated, “the fidget spinner craze is dead”. Confusing a shift in the supply curve with a shift in the demand curve is a dangerous way to interpret retail trends. There seems to be no data to support this claim other than slowing sales for many retailers. Slowing sales would be symptom of the craze ending, but slowing sales for individual retailers does not mean the spinner craze is over, it is just that more retailers are now in the game.
As marquees dotting beachside trinket shops has proven, supply has caught up with demand and it seems that every gas station, drug store and grocer is carrying spinners today. With supply readily available, our law of supply and demand is a work rather you realize it or not. As retailers saw profit potential, makers rushed to manufacture fidget spinners. As shipments have begun arriving by the container load, competition has set in and prices have naturally fallen as spinners are on the shelves of everyday retailers. In simple economics terms the supply curve has shifted naturally to meet demand.
The question is “what about the demand curve for spinners?” It would appear the demand curve for spinners overall has stayed strong with the additional supply. The best source for data in a world driven by internet sales is Amazon. Several fidget spinners listed on Amazon today sold more than at any point before, gross sales on fidget spinners have continued to grow all spring and summer according to Amazon analytics. Some high-end fidget spinners are having their best sales ever this week. Examples of this include a Harry Potter Quidditch themed spinner and a Captain America spinner that had an incredible Amazon sales ranking today of 156 and 221 respectively, and seem to be getting stronger every day. 17 of the top 20 new items on Amazon currently listed are fidget spinners and have been for several weeks.
Based on the Amazon sales data, the fidget spinner craze should continue, and could be one of the hottest stocking stuffers for Christmas. Retailers who are looking to make quick sales on low-end fidget spinners will find lower margins, with stiff competition and pricing as supply for fidget spinners is now readily available. Retailers who focus on higher-end fidget spinners will continue to see success although at lower gross margins than those offered at the beginning of the craze.
Next time you are fidgeting with your fidget spinner, think about real world economics at work. People want stuff, and sellers want to make money, what could be simpler? The fidget spinner craze is just another real-world example that the free market economy is alive and working just like those complicated, boring econ textbooks and teachers told you it would. For now, as I sit and ponder this and the rest of the world’s problems I will fidget with my sons missing fidget spinner.