Toilet paper; what SARS can tell us; electricity prices

It’s Friday. Thank god. I am already tired of quarantine, and we have a long slog ahead of us.

Toilet paper: I really liked this article on the toilet paper shortage. Basically, most people say that the shortage is due to hoarding. Why? Well, people’s use of toilet paper hasn’t increased, so people must assume that people are buying more than they need. Oremus’ theory is that it is actually because people are using toilet paper at home (40% more than they would normally) rather than in the office/restaurant/bar/school/etc. Then commercial and retail toilet paper is different (different sizes, different inputs), so it is hard to sell the commercial stuff retail.

Think about it this way. Normally you can always find toilet paper. And let’s say that most stores have about a week’s worth of supply on its shelves at a time. Well, if people come in and realize they need 14 rolls instead of 10 a week, then that week’s supply on the shelves will get bought out very quickly. Put it another way (and I am making up the number): let’s say the rolls on the shelves serve as a 10% buffer against normal demand, the problem is that people are using 40% more than they need. Where are they going to get the extra 30%?

And the article goes on to apply this theory to lots of other products: bananas, beer. I can think of flour, which is probably stuck in 50lb bags at wholesalers. The problem is that someone needs to bag it up and slap a price on it, and the wholesales aren’t good at that.

Some of this will be worked out, and hopefully we will get out of this quarantine before it is needed. In the meantime, break into your old school and steal some toilet paper (j/k).

The experience of JD.com and Alibaba during SARS: Yesterday, I wrote about MWG and its increase in online sales. My view is that the company should be able to use this occasion to raise its online profile. Support for this comes from examples of two Chinese companies during and after SARS. JD.com and Alibaba saw massive increases in online sales during and after the SARS outbreak back in 2003.

JD.com didn’t have any online sales - it was a small chain of retail electronic stores. The founder closed most of the stores and had to resort to selling goods online, but without any of the infrastructure. It appears he learned a lot, because it is now one of the largest online retailers in China.

Alibaba was a B2B e-commerce site, and it got a massive jump (3-5x) from SARS. It also used the opportunity to start a B2C and C2C site. It quickly became the largest C2C seller in China.

Data for September 2019. USD per kWh for households. Source: GlobalPetrolPrices.com

Vietnam cutting electricity prices: The good news about a somewhat planned economy is that things can be done centrally. The government is planning to cut electricity prices by 10% is probably good, since it helps everyone deal with bills during a time when little income is coming in.

Prices in Vietnam are already relatively low, especially compared to its ASEAN neighbors. This implies subsidies, given that FiT are higher than this (the government is paying wind producers 8.5c per kWh). So the subsidy will have to increase. This is probably the right time for it.

Separately, the government announced it will give poor households and those who lost jobs due to COVID-19, VND1m a month (a little over $40). This isn’t much (if this is your only income, you will be under the poverty line), but hopefully it can help tide some people over. This is supposed to be for all of 2Q.