After the famine, the flood. The past two years have been plagued by shortages of supplies – with just-in-time retailers struggling to send their goods, electronics manufacturers staring down at the lack of computer chips, and supermarkets struggling to fill their shelves. Now some retailers are struggling with the opposite problem: a deluge of things no one wants to buy.
Some of the largest retailers in the United States have almost $ 45 billion in excess inventoryaccording to Bloomberg, a 26 percent increase from a year earlier. It is a result of retailers struggling to avoid the shortage that marked the start of the pandemic and then failed to anticipate a slowdown in consumer spending as the world opened up. Now, in an effort to shift volumes and reduce losses, companies like Target, Gap and Walmart are relying on deep price reductions.
Many retailers are dealing with the problem Amazon faced in its most recent first-quarter results: Caught flat-footed when Covid hit, they planned increased demand that just hasn’t turned into anything. For Amazon, this has meant a surplus of empty storage space. For others, it is the opposite problem: too many things and not enough space to store or sell it.
Costco has a backlog of Christmas-themed items that did not arrive in time for the final Christmas period, and plans to put it on the shelves this year, but the prices of other items, including the big TVs that are popular during lockdown, are likely to tumble. Meanwhile, the pajamas that countless column inches was devoted to in the early stages of the pandemic, will now likely be greatly reduced along with other casual wear in fashion during lockdown.
“It really starts with the pandemic,” said Lisa Ellram, a prominent professor of supply chain management at Miami University, Ohio. “Retailers did not know what to do.” Between February and March 2020, retail sales increased 9 percent in the United States, declining another 15 percent a month later. But by June 2020, retail trade had returned to pre-pandemic levels, and it has continued to rise ever since. “Things were really picking up speed – and they could not meet the demand because people had stopped buying things, then suddenly people wanted things,” Ellram says. “There were all these strange and unexpected changes in demand that caught many businesses off guard.”
These demand shifts coincided with some of the worst supply chain disruptions in recent history. “People had purchasing power and could not buy many of the services they normally use, so they bought goods,” says Marc Levinson, author of two books on shipping containers. Levinson was one of them: he bought a sofa – and then waited nine months for it to be delivered when the Covid eruption closed Chinese ports and the Suez Canal, through which 12 percent of global trade passeswas blocked with a very large boat.
With delays and interruptions as the norm, companies strived to avoid future shortcomings by overbought and keeping inventory locally instead of relying on the increasingly broken just-in-time supply chain. Others have spent large sums of money rebuilding the supply chain completely. Intel, for example, has said it will build a $ 20 billion deal chip manufacturing site in Ohio to facilitate shortages due to the supply chain.