Tuning into the news over the last few weeks, you would have heard tons of commentary on the U.S. retail market. With all that’s circulating, it might be challenging to find the signal in all that noise and see what’s actually going on. To summarize, many of the largest retailers including Target and Walmart reported major inventory surpluses—with Target up 43%, Costco 26% and Walmart 32% year-over-year.
The bottom line? American retailers are growing inventories faster than sales. Some of that may be precautionary—‘just in case’ rather than ‘just in time’—but some may reflect waning consumer demand and a shift back to pre-pandemic spending behavior. Prior to the pandemic, spending on goods and services was more balanced meaning more consumers spent more money on restaurants and gyms rather than bread makers and in-home treadmills.
Brands are dealing with different sides of the same coin where they can’t strike the balance between too much and too little inventory. Either way, the common factor remains—retailers are not stocking the right quantity of the right products.
What does this mean for smaller ecommerce and retail businesses that don’t have abundant warehouse space to store next year’s inventory? In situations like these, it’s wise to start by addressing your businesses’s forecasting accuracy.
Balance Inventory, Keep Costs Low
You walk a fine line between meeting customer needs and keeping costs low, between stockouts and inventory hangovers—either scenario can spell trouble if you’re already operating on thin margins. To accomplish this balancing act, there are a few things to focus on:
- Create a sales and order management process with the right leaders at the table (incl. logistics, finance, marketing, and sales).
- Take to demand forecasting tools, especially if you’re in a competitive, high-growth segment.
- Invest in a logistics tech platform/stack that enables you to make confident decisions, and that can grow with your business. Your platform should structure your supply chain data and provide end-to-end visibility from purchase order to final delivery.
- Share production milestones and expected delivery dates in real-time so that your teams can manage exceptions to the plan.
Optimized, data-backed demand planning made possible by modern logistics technology helps businesses stay in sync with ever-changing customer buying habits. By keeping close tabs on trends, you can always stay ahead of overstocks, stockouts, and everything in between. In addition, Flexport Research publishes original weekly and monthly reports designed to keep you up-to-date and help inform your decision-making.
Now more than ever, companies need real-time inventory visibility to prepare themselves for the unexpected. By accessing data-dense insights, you are setting your business up for success—even in an unpredictable global market.
__Real life examples where these practices might come into play: __
The U.S. Department of Commerce reported that U.S. ecommerce sales grew 2.4% in the first quarter of 2022. In Q1 of 2022 alone, U.S. ecommerce retail sales totaled $250 billion. The same report shows that ecommerce sales in Q1 accounted for 14.3% of total retail sales.
A new report by Getwizer found that 81% of children under 12 (Gen Alpha) are influencing family purchases, translating to $500 billion in purchases a year. Compared to Gen Z, Gen Alpha is even more issue-driven, despite their young age.
U.S. ports congestion will get worse before it gets better according to ocean carriers, forwarders, and experts. Rail congestion isn’t getting any better either due to a chassis shortage that’s forcing drivers to wait hours to pick up a load.
Warehouses may be in for some competitive pricing,partly because Amazon has been reducing demand for its warehouses and is subleasing some of its 374 million square feet of space. Talk to your 3PL about what this means for storage costs and space availability.
About the Author
Many major retailers like Target and Walmart are reporting inventory surpluses—with Target up 43%, Costco at 26%, and Walmart at 32% year-over-year.
Companies can best manage their inventory with data-driven order management and end-to-end visibility from purchase to final delivery.
Modern logistics technology uses data insights to predict changing customer buying habits so brands can stock inventory accordingly.
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