Overstocked retailers may turn to deep discounts to make way for seasonal merchandise
HOUSTON - Consumers should get a break from some retailers, who are finding they've got too much inventory that's got to move. It's a perfect storm of supply-chain challenges, changing spending patterns, and high inflation, that's affecting a lot of major retailers. Some are planning aggressive sales to help get things in order.
Strolling through a Fort Bend County Target store, it does not take long to find some deep discounts in the aisles. Small appliances, TV's, electronics, and outdoor goods, like patio furniture, that were popular purchases during the height of the pandemic, are all on sale.
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In guidance to investors, Target says it has a lot of unsold inventory that will be deeply discounted to make room for incoming merchandise critical for the fall and holiday shopping seasons. By way of corporate explanation, an executive told analysts, "The mix of actual demand materialized differently that we had anticipated."
University of Houston supply-chain expert Margaret Kidd says retailers are still trying to recover from pandemic challenges.
"When you see inventory in stores, and it's not moving, retailers have to mark those prices down."
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First, shoppers couldn't come to the stores, then supplies dried-up when demand exploded, and finally, rising prices changed consumer spending habits. Retailers like Kohl's, Walmart, Macy's, and Best Buy have all reported overstocked warehouses, as shoppers become more selective on non-discretionary spending.
While reporting quarterly-earnings, Walmart CEO Doug McMillon said, "Inflation pulled more dollars away from general merchandise than we expected as customers needed to pay for the inflation in food."
The net effect is potential good news for bargain-hunters, who will find sales in the coming months, and continued challenges for retailers that are still trying to find balance.
"What you've seen is that they possibly over-adjusted for this lack of availability, so supply and demand have not met up," says Kidd.
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For its part, Walmart says it expects to take a couple of quarters to thin its overstock problem, and other retailers are developing their own plans to resolve the backlog.
Margaret Kidd believes energy costs, and the Ukraine crisis, could keep business out of balance for a year, or more.