In economic theory there is such thing as a buyer’s market and seller’s market. What is each of them? What distinguishes a buyer’s market from seller’s market?
Facts about the buyer’s market
Under the buyer’s market is a situation in the economy, when supply exceeds demand. As a result, sellers are forced to save revenue, lower prices. Moreover, they need to pay very close attention to the quality of the product — if it be insufficient, to purchase goods will be the competition.
A buyer’s market most often formed because of the high competition or because of not enough high capacity segment.
Another reason for the formation of a buyer’s market — reduced demand for goods for economic reasons, as well as technological changes in the manufacture of products. If we talk about the economic reasons — is, first of all, reducing the purchasing power of citizens, and changing patterns of demand.
Regarding technological change — buyers can begin to experience a need to use more sophisticated (e.g., more productive — if we are talking about electronics) products than those available on the market, although past their arranged.
to content ↑facts about the seller’s market
Under the seller’s market is a situation in the economy where consumer demand far exceeds supply. As a consequence sellers can raise the price of the products sold.
The producers often do not pay enough attention to the quality supplied to the market of the products, as sold out virtually any. This occurs most often because of the desire of suppliers to save on the costs of production of goods, delivery, registration and to obtain thereby additional income.
A seller’s market may be formed for various reasons. For example — owing to the lack of high competition or very high capacity segment. But in the second case, producers as a rule, I try to monitor the quality of goods and not too overprice — to interest the buyer and to increase its market share.
to contents ↑the Difference between buyer’s market and seller’s market
The main difference between a buyer’s market from seller’s market — in the ratio of supply and demand. In the first case demand exceeds supply, the second — on the contrary. There is also a difference in the interaction of seller and buyer in each of the considered types of the market. In a situation where demand exceeds supply, suppliers can significantly save on quality products offered to clients. When the buyer’s market the quality of goods is, as a rule, significantly higher.
There is a point of view according to which the entrepreneur, leading the activities in the market of the seller, will be more successful than working in the market of the buyer. This position may seem logical — the business will be guaranteed revenue which can always be increased by raising prices.
Tactically, the entrepreneur will be the winner. But from the point of view of building a long-term development strategy of the business use of the advantages of a seller’s market, most likely, will play a negative role. The fact that a firm, accustomed to the fact that demand exceeds supply (and therefore easy to manipulate quality and prices) may not be quite ready for any serious competition. In turn, doing business in the market conditions of the buyer require from the owner of rapid adaptation to current competition. If he does not have debugged the production of goods with high quality and also willingness to work with less profitability, success in business to achieve it would be extremely difficult.
Defining the difference between buyer’s market and seller’s market, reflect the main findings in the table.
to content ↑Comparative table
A buyer’s market
A seller’s market
Characterized by the fact that supply exceeds demand
Characterized by the fact that demand exceeds supply
Ensuring the high quality of goods buyer’s market is among the main conditions of success in business, as low quality product will always be the best alternative in the form of proposals from competitors
Suppliers are in a seller’s market not always pay attention to the quality of goods, because they, anyway, will buy