With shortages during 2020 and 2021, and then an oversupply in 2022, many retailers now are starting to have slimmer inventories. But where does that leave retailers for the rest of this year and beyond?

Key Takeaways:

  • When retail inventories hit their peak
  • Having an oversupply of inventory can be challenging, more warehousing can be costly
  • What retailers have learned from the past couple of years
  • Most retailers are in a better position now, uncertainty around consumer demand remains

Overstocked Inventories

Retail inventories hit their peak back in October 2022, as they were up 18 percent from 2021 levels. Since then, as Supply Chain Dive notes, inventories have fallen a significant amount but are still above where they were three years ago.

For Target, their inventories at the end of the most recent quarter were 16 percent lower than the same time a year ago. While Walmart slashed inventories at their U.S. store operations by 9 percent over the past year.

“In-stock is improving, and excess inventory keeps coming down. We see it in the numbers, and I’m seeing it on store and [Sam’s Club] visits,” Walmart Chief Executive Doug McMillon said in an earnings conference call.

Inventories at U.S. general merchandise stores expanded 1.2 percent in March, according to the U.S. Census Bureau figures, after pulling back over several months from a record high last August.

For wholesalers – a middleman distributor between the distribution of goods from manufacturers to retailers – have been feeling the brunt of it, dealing with leftover stock.

For merchandise suppliers, it can be a bit anxiety inducing, with some retailers not placing firm purchase orders. Which then leaves their vendors having to place informed “guesstimates” on how much a retailer will purchase, based off by a retailer’s projections.

Where Do Retailers Go From Here?

Depending on how the recovery of demand goes, some industry experts suggest retailers will have an easier time seeking inventory out.

“Those bottlenecks are gone, so if you do have much more normal ramping of production on the manufacturing side, getting it here shouldn’t be too much of an issue, at least in the near term. I’m hopeful these guys will be smarter about it,” said Joe Feldman, a Senior Managing Director at Telsey Advisory Group.

However, majority of retailers are in a much better position than they were a year ago. Now the focus is more on the consumers. As it’s unlikely that retailers will start to increase purchase orders anytime soon, even if demand comes back.

Looking Ahead

For reference, U.S. consumer spending rose 0.4 percent in April after two straight monthly declines. A stat that has retailers continuing to remain cautious from consumer mixed signals.

Should you have any questions regarding this and how it could impact your shipments, please reach out to our team today.

Additionally, we have our weekly market updates that can provide you with relevant freight news, updates, developments across the industry, and more.




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