Business, Legal & Accounting Glossary
Buyer’s market or soft market is a type of market characterized by more number of sellers than buyers. The reason behind such type of market being low prices due to which there is an excess of supply than demand. Since, there is less number of buyers so sellers compete with each other by lowering prices, in such case there arises the excess of supply over demand increases and prices is lowered considerably.
A buyer’s market is any market in which there are more sellers than there are buyers. The laws of supply and demand typically cause prices to drop in a buyer’s market. A buyer’s market can be likened to buying a stock at sale prices. A buyer’s market can refer to the stock market as a whole, to a sector of the market, or to an individual stock. During a buyer’s market prices typically fall until enough buyers come back into the market to begin driving prices back up. The opposite of a buyer’s market is a seller’s market. In a seller’s market, there are more buyers than sellers, driving prices up. A buyer’s market can be triggered by an overall drop in stock prices, by negative news, or by a recognition that prices are too high from a fundamental standpoint.
The concept of Buyer’s market can be explained with an example. Let there be a total of 10 houses that are to be sold and 5 buyers are present in the market. If each buyer purchases each house, then 5 of the total houses will not be sold. In this case, the sellers of 10 houses will compete with each other by lowering prices so that they can attract a buyer for their house. The resulting market formed due to this is known as a buyer’s market or soft market.
Buyer’s market or soft market is the result of inactive trading. Because of minimal selling pressure, there is a pronounced drop in prices. The condition of a buyer’s market or soft market can be easily conquered by engaging a few strategies. First of all, it is needed to prepare optimistic goals for a soft market. If your business is caught up in any kind of buyer’s market or soft market, the first step that you can take is critically and candidly examine your business and its marketing strategies. You need to look for the sectors of your business that are not functioning well. Then you need to evaluate your sale processes that can include marketing operations, pricing, business mix and revenue management strategies. The most appropriate action could be conducting a SWOT analysis of your level of competition, market location, price strategy, and product differentiations.
The major step to surviving in a buyer’s market or soft market is to create a comprehensive marketing plan to derive revenue even in a market condition where there are more sellers than buyers. You can use a demand map to identify novel growth opportunities available in your business. Once you identify the growth opportunities, you can set targets to take advantage of and be triumphant in your target markets.
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This glossary post was last updated: 28th March, 2020