What is market demand?

Market demand describes how much consumers in a particular segment want to purchase a certain product or service, making it an important consideration for ecommerce merchants. Market demand is determined by considering who those potential customers are and how many there are, the price they’re willing to pay for those goods and services, and the available market supply of those goods and services. It typically fluctuates over time based on a number of other factors, including time of year and unpredictable events that impact consumer behavior, such as a natural disaster. Supply and demand are closely related: As demand increases, prices increase, and as demand decreases, price decreases. 

Market equilibrium is when there is an equal balance of individual demands and quantities demanded. In other words, there is no over or under supply of goods or wildly fluctuating individual demand, resulting in a stable harmony for consumers and sellers. 

How to conduct market research for your ecommerce business

Researching market demand for your industry or sector is hugely beneficial for gathering key takeaways for your business such as pricing, managing inventory, forecasting, gathering information about customer response to certain products or services, and estimating how profitable your industry has the potential to be. Studying and analyzing trends in consumer demand is essential, as only studying demand for individual people or households may lead to inaccurate predictions and forecasting. 

A market demand curve can be represented on a graph by using price on a vertical axis and demand on horizontal axis. This typically shows a downward sloping line representing price increasing and demand decreasing. If quantity demanded increases when the price is lowered, the curve slopes upward.

Strategies for market demand research can include insightful analysis through social media surveys, tracking customer response to discounts on certain products, studying competitors, and keeping a pulse on topics and products trending on social media.