As children head back to school this month, struggling retailers are gearing up for what they hope will be a very robust shopping season. Many parents view back-to-school spending as a necessity rather than discretionary, and retailers are betting that upcoming sales will help boost their bottom lines. Back-to-school shopping is a good indicator of consumer demand going into the holiday season. That indicator will be watched closely this year.
Retailers are in a challenging position this summer because of high inflation and excess inventory. The pandemic fueled purchases of items like furniture, home décor and loungewear. In response many companies stocked up on goods last fall and winter, especially as supply chains became increasingly fragile. Consumers have shifted their spending towards fuel and food during the recent high inflation leaving retailers with excess inventory languishing in their warehouses.
Retailers’ inventory management approaches have moved to keeping more product in stock long-term to mitigate the risk of stock-outs. Finding storage space is proving difficult, though, because many warehouses are already full of excess inventory. The shift from maintaining “just-in-time” inventory to “just-in-case” inventory has led to what Prologis, Inc., the world’s biggest owner of warehouses, believes is a shortage of 800 million square feet of warehouse space.
The good news for parents and all consumers is that the fierce competition between retailers is expected to lead to significant discounts and sales this August. Expect to see markdowns on clothing, furniture, computers, and toys as retailers try and make room for fall and winter inventory. This would be a very welcome reprieve for many Americans during this time of high inflation.
Although I am not a parent, I am a recent first-time home buyer and have had the daunting task of furnishing a new home during a supply chain crisis and rising inflation. With very long lead times and shipping delays for furniture and home decor, I have looked to source furnishings from antique stores, consignment stores and Facebook Marketplace. Items are available for immediate pick-up and are often significantly discounted.
Another bonus to treasure hunting at secondhand stores is the environmental benefit. Many consumers are embracing the opportunity to give unique items a second life and keep them out of the landfill. Furnishing my home has encouraged me to buy fewer, better items and invest more in quality construction in all aspects of my life. In a world where we expect that everything can be delivered in two days or less, it has been a nice reminder to slow down, practice patience, and buy what I need, not always what I want.
This new practice notwithstanding, there is no question that large retailers like Target, Best Buy, and Walmart will dominate the consumer goods landscape for many years to come. There are some items you just need quickly! As these companies continue to grow, the need for warehouses will only become more pertinent, and I look forward to watching how the supply chain evolves to meet consumer demands.