After two pandemic years of stocking up on stuff – desk, chair, bookshelf, dresses, blender, knives – Rachel Premack is now all about travel and saving what she can. Last year, she had the stimulus dollars and nowhere to go; Now, she’s got weddings and family visits and worries about rising prices.
This, on a nationwide scale, became the recipe for a whole new problem for some US stores: a glut of inventory.
“It is just a really bizarre back and forth kind of situation,” says Premack, who has followed all this as an editorial director at the logistics outlet FreightWaves. “Inventory managers at major big box stores don’t even know how to navigate what’s happening anymore, they are just exhausted.”
Big box stores like Target and Walmart are particularly working through an excess of certain items.
Target has specifically named TVs, kitchen appliances, outdoor furniture, electronics and fitness supplies, with the CEO saying the chain did not anticipate “the magnitude” of the spending shift from goods to services. Some clothing stores, too, such as Gap, got stuck with too many hoodies and athleisure as office workers quickly jumped back into suits and dresses.
“If you think about it, [stores are] ordering goods three, six, even nine months in advance,” said Mark Mathews, vice president of research development and industry analysis at the National Retail Federation. But there is no template for what consumer behavior looks like coming out of a pandemic.”
This year’s hot retail term is the bullwhip effect.
It describes how dips or jumps in demand can get exaggerated by retailers, their suppliers and manufacturers. Take the pandemic darling, the air fryer. When demand suddenly rises, stores rush to avoid empty shelves, ordering a few extras just in case. Their suppliers also order extras from factories, which also make even more extras – until, abruptly, there are too many air fryers right as people are kind of done buying them.
What does that mean now? Shoppers might see sales on some items, such as storage baskets or armchairs, particularly at big box stores. More goods will go to liquidators and discount stores. But it also means another chaotic year for suppliers, like Curtis McGill from the Texas toy company Hey Buddy Hey Pal.
The other day, a large retailer completely rescended a commitment to buy one of McGill’s best-selling sets. A big toy trade show produced fewer orders, too, he said, by over a third. Stores are cautious about future demand – partially because of inflation uncertainty, but partially because their money is tied up in storing and sorting out the inventory glut.
“You could say for being in the toy business this last probably 12 months [period] has not been as much fun as it should be,” McGill said.
The shopping frenzy has slowed but hasn’t ended.
In the next few weeks, new data will show how long this inventory glut might last, said Jason Miller, who tracks retail inventories and sales at Michigan State University. Initial evidence suggests the retailers with bloated inventories are already starting to get things under control.
Still, importers continue bringing in near record-high amounts of goods to the US, he said. That’s because even though last year’s shopping frenzy has slowed, Miller said, people are still buying more products than they did before the pandemic.
MARY LOUISE KELLY, HOST:
Too many TVs and kitchen appliances and hoodies. Stores like Target and Walmart have been working their way through stockpiles of stuff that people really wanted during the pandemic until suddenly they didn’t. NPR’s Alina Selyukh reports.
ALINA SELUKH, BYLINE: You might be wondering, didn’t we talk about shortages for the past two years? Yes, and that’s actually part of the story. There’s a hot term in retail these days…
(SOUNDBITE OF BULLWHIP CRACKING)
SELYUCH: …The bullwhip effect. To explain it, let’s go to this kitchen appliance aisle at a Target store in Lincoln, Neb.
There is an air fryer that’s half price, basically, $55, save $45.
The bullwhip effect is part of why it’s on sale. Here’s how it works. In the pandemic, people went crazy for air fryers. When demand jumps like that, stores order from suppliers and suppliers order from factories. And each step of the way, they order or make more and more and more until, abruptly, we have too many air fryers right when people are kind of done buying them.
RACHEL PREMACK: And then suddenly, we have a goods surplus instead of a goods shortage.
SELYUH: Rachel Premack follows the supply chain for the logistics outlet FreightWaves. Her own shopping habits perfectly illustrate how this played out across lots of products. For the past two years, she’s spent her stimulus dollars and money saved from not going out on stuff.
PREMACK: I bought a blender, this desk and this chair that I’m sitting in right now. yeah.
SELYUH: This stuff, she won’t buy again for years. And now, like so many people, she’s spending mainly on travel, weddings and family visits. And she’s trying to save more as prices keep rising.
PREMACK: It’s almost as if the retailers and manufacturers were not expecting this.
SELYUH: Of course, they were, just with varying degrees of success.
MARK MATHEWS: Inventory ordering is an imperfect science at best.
SELUKH: Mark Mathews is with the National Retail Federation.
MATHEWS: If you think about it, you’re ordering goods three, six, even nine months in advance. Retailers base their forecasting on historical behavior, but there is no template for what consumer behavior looks like coming out of a pandemic.
SELYUH: That means some stores are still facing shortages like canned pet food, for example, but others have a glut of certain items. Gap, for example, said it got stuck with too many fleece hoodies and athleisure right when office workers went back to suits and dresses. But mainly, the mismatch is affecting the big-box stores. Target has publicly said it overstocked on TVs, outdoor furniture, electronics and fitness supplies.
MATHEWS: So maybe we’ve seen a little bit of over ordering, but we’ve also seen, you know, maybe not the right assortment.
SELUKH: What does that mean now? Well, shoppers might see sales on some random items at big-box stores or online. Some goods are going to liquidators or discount stores. But it also means another chaotic year for suppliers like Curtis McGill from the small Texas toy company called Hey Buddy Hey Pal.
CURTIS MCGILL: You could say from being in the toy business this last probably 12 months has not been as much fun as it should be.
SELYUKH: He says many stores are cautious now about placing future orders, partially because of inflation uncertainty but partially because they don’t really want to spend on new stuff when they’re already spending to store all this old stuff.
MCGILL: As recently as yesterday morning, we had a commitment from one of the larger retailers that was rescended just completely.
SELUKH: In the next few weeks, new data will show how long this inventory glut might last, says Jason Miller, who tracks all this at Michigan State University.
JASON MILLER: Now what we’re seeing is some initial evidence that the retailers that build up a glut of inventory are starting to get things under control.
SELUKH: He says last year’s shopping frenzy has definitely slowed down, but people are still buying more products than they did before the pandemic. Alina Selyukh, NPR News, Lincoln, Neb. Transcript provided by NPR, Copyright NPR.