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Global trade changes have accelerated over the past 18 months. In 2021 and the first quarter of 2022, low inventory curbed strong consumer demand due to supplier issues. Then rational buying stopped as inflation hit consumers.

Now, while dealing with supply chain issues, retailers are holding onto large inventories that reduce demand. Retailers and logistics companies are scrambling to find opportunities to store returned goods, unsold goods and new goods for the upcoming holiday season

Lagging consumer demand has created a surge in excess inventory. This warehouse is owned by Liquidity Services, a liquidation company.

Inflation

Economists continue to wonder if we are in bankruptcy. U.S. inflation so far in 2022 has risen 8%, but price increases are affecting key items such as commodities and oil. Prices of non-essential items have fallen.

The Adobe Digital Price Index is based on data from Adobe Analytics and analyzes 1 trillion visits to retail sites worldwide and more than 100 million SKUs across 18 product categories. In July, according to Adobe DPI, consumers The global market spent $73.7 billion online, down $400 million from the previous month. Annual e-commerce spending in July rose 20.9%, largely due to Prime Day sales. Online e-commerce spending has reached $525.4 billion so far in 2022 according to another Adobe report. However, Internet spending in July was down from May’s $78.8 billion.

Customers focus on basic products. In addition, many are turning to buy now, pay for groceries. Grocery chains Albertsons, Kroger and Safeway have partnered with provider BNPL Zip, allowing customers to make four long payments for their purchases.

As a result, the use of BNPL by consumers has shifted from basic purchases to routine expenses. Food (including hotel orders) will account for about 6% of BNPL’s $45.9 billion in internet bills in 2021, according to data research firm Global Data. BNPL supplier Klarna reports that more than half of the top 100 items purchased by its users are now food or household items.

Inventories

The game between supply and demand is increasingly unpredictable. Due to changes in the supply chain, retailers have ordered products in advance to ensure availability. When consumers cut back on non-essential purchases, inventory increased.

Retailers are looking to add security capabilities, both for holiday items now entering the fulfillment center and protecting products during the holidays. Still, they’re stuck with clothes that go out of season and big-ticket items that customers stop buying.

Brick-and-mortar retailers, direct-market retailers, and wholesalers must decide whether to take bulk inventory or sell it on hand. liquid industry, often for pennies and dollars. Liquidity Services, a company in liquidation created in 1999, benefits from surplus goods. It collects and resells and returns products from retailers such as Target and Amazon.

Prologis, the world leader in square footage warehousing, said in a recent market survey that it expects to need 800 million more warehouse spaces than previously forecast to manage excess inventory.

Apparel sales have seen significant changes in the past three months. According to Adobe research, global clothing prices fell 1% year-on-year in July and 6.3% from June. It comes after 14 months in a row of significant price increases. Ecommerce prices for electronics – the largest online category with a share of 18.6% of spending in 2021 – fell sharply in July, falling 9.3% year-on-year in response to weak sales.

Big retailers – Bed Bath and Beyond, Best Buy, Nordstrom, Target, Walmart – said price cuts and earnings calls or 2022 earnings guidance. Walmart said it expects to earn operating income for the year down as much as 13% due to unsold benchmarks.

Peloton, the maker of expensive, technology-connected exercise machines, suffered big losses this year as people returned to public gyms and stopped buying luxury exercise equipment. In the quarter ended June 30, 2022, the company lost $1.2 billion. Its stock has declined. In August, Peloton announced that it would sell its entry-level bikes on Amazon, a departure from the online consumer market and physical stores. Peloton said it will close most of its stores in the United States next year.

Unpredictable

In short, uncertainty is shaping up to be another tough year for both physical and online retailers. In addition, the US Federal Reserve’s intention to raise interest rates may discourage consumers from borrowing during the holiday season.

 

 

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