U.S. Retailers Struggling to Find the Right Balance of Inventory

Major U.S. retailers have been struggling to find the right balance of inventory this year. Some U.S. retailers ordered too much inventory and have been left with more than they need or want.

Some U.S. retailers still didn’t order enough inventory of certain products and have been left scrambling to figure out if they will receive more inventory of those products in time for the holidays.

And as some of you may have heard of the story of “Goldilocks and The Three Bears,” some U.S. retailers ordered “just the right amount” of inventory.

So why has it been such a struggle for U.S. retailers to find the right balance of inventory? We will take a look at that, as well as how the 2021 holiday season was like for U.S. retailers and consumers, and what the 2022 holiday season is forecasted to be like.

Recap of the 2021 Holiday Season

Lets take a look back to last year and what inventories looked like for U.S. retailers.

Last year, inventory was lower for most retailers which also meant consumers were eager to get their hands on products that they knew were go off the shelves fast. This also meant that retailers were not offering as many discounts on products as they normally have done.

Furthermore, back in 2021, retail saw strong growth that was stemmed from increases in consumer spending. This should not be too surprising, as many consumers in 2020 were not spending as much on certain things and more spending money on household essentials. 2020 was also the year the pandemic caused closures and social distancing, which meant more consumers were shopping online versus in store.

Another thing to note is holiday shopping season started early last year, pulling demand forward. As Insider Intelligence notes some Black Friday promotions started as early as in October which then also caused an increase in Pre-Thanksgiving shopping activity.

U.S. consumers also started their holiday shopping a lot sooner, because of the supply chain challenges that were impacting the nation, with ports being congested, capacity was thin, rates were high, etc. According to a survey conducted by Pollfish, as reported by Insider Intelligence, 56% of U.S. adults began their holiday shopping before Thanksgiving weekend, while 28% started before November.

Total holiday retail sales increased by 16.1% ($1.221 trillion) in 2021.

Forecast for the 2022 Holiday Season

Throughout this year, inflation has been the biggest talking point, as prices for gas, groceries and other everyday and essential products and services have seen increases.

Interestingly enough, nearly 60 percent of U.S. shoppers have said that finances are a factor in their holiday shopping decisions, which is up from 14 percent last year – a survey by Sensormatic Solutions details.

“Consumers are less compelled to buy, and they’re going to need the call to action,” David Silverman, a Senior Director at Fitch Ratings, told the New York Times. Now retailers have less merchandise that some consumers are not as interested in. This has made retailers start to think a little differently on how to win the consumers over, compared to just thinking about the profit margin from purchase.

Additionally, data has shown that foot traffic in stores has yet to rebound from pre-pandemic levels. In September, it was down 8.8 percent in department stores, and 8 percent in specialty apparel compared to last year. Compared to 2019, department store foot traffic was down 24 percent and specialty apparel was down 14.5 percent, data from the New York Times shows.

Looking Ahead

We all knew that when a “new normal” or sorts began after the pandemic, it would take some time to adjust in all facets. That goes for retailers having to figure out not just how and when to order products for their inventories, but also how to best get consumer compelled to buy goods from them.

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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