![]() Retailers went into hyperdrive to satisfy that shift, Cohen says. Demand for items like suits and formal wear dried up as people abandoned offices, while the need for things like cleaning supplies, home-gym equipment, and furniture surged. Consumers began to hoard as panic set in (which, as we all remember, led to the horrors of the toilet paper shortage). In 2020, when the virus brought the world to a standstill, products weren’t being assembled and things weren’t being shipped. “But Covid was this all-encompassing disruption that just completely overwhelmed the world in a way that we haven’t experienced since World War II.” “Feast or famine issues with inventory aren’t new,” Cohen says. That distortion gets passed along, and is typically amplified, at each step of the supply chain, creating inefficiencies like long wait times for products and the surplus we’re seeing now. The term describes how businesses tend to react to a surge in demand by over-ordering to avoid shortages. Companies are stuck with too much stuff, their warehouses are full, and they’re taking some creative measures to get rid of that excess inventory, according to Mark Cohen, the director of retail studies at Columbia Business School.Įconomists call this phenomenon the bullwhip effect. Now, the pendulum has swung the other way. Three rounds of stimulus checks and the promise of new Covid-19 vaccines had primed consumers to go big for the holiday shopping season, but a gummed-up supply chain and a labor shortage left retailers scrambling to meet the soaring demand. “If you get a shipment of sweaters in May that you were expecting in January,” Roggeveen said, “that won’t be as useful, and won’t move as quickly.Think back to the winter of 2021, when stores struggled to keep shelves stocked with everything from Xbox consoles to artificial Christmas trees. In that case, consumer demand can move forward. Origins of this problem also can stem from companies not receiving inventory in the time frame in which they were initially seeking it. “For retailers, doing this now allows them to be positioned correctly for the holidays, and have things in stock that customers are going to want,” Roggeveen said. There are supply-chain issues, inflation, the move of consumers out of the pandemic mindset to the ‘let’s get back to normal’ mindset.” Professor Anne RoggeveenĬutting prices can be effective in helping companies move inventory, with profit remaining a goal, but breaking even or taking a loss is a possibility. “Retailers have been focused on managing the pandemic and stocking consumers’ desires,” the professor said. This shift in consumer-spending habits, inflation, and supply-chain constraints has created a perfect storm for some retailers, Roggeveen says. “They’re not as interested in the bread machine that they might have been interested in when they were stuck at home,” she said. What is definitive is a shift in consumer-spending habits that has left hot items of months past less desirable, says Anne Roggeveen, the Charles Clarke Reynolds Professor of Retailing and Marketing at Babson College. What goes on sale, and how deep the discounts will be, is unclear. Big-box competitors Walmart, Kohl’s, and more also reported rising inventories when earnings were announced last month. Prompted by a 50% decline in profits from 2021, Target announced recently that it was cutting prices, canceling orders, and removing excess inventory. Too much inventory in an era stocked with supply-chain challenges? It is a reality for a handful of big-box stores, most recently, Target.
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