Four Forces Feeding Excess Inventory

Paul Gagnon
Vice President, Industry Advisor, Consumer Technology

The pandemic resulted in a number of abrupt changes to consumer behavior, including the need for home to be a place you can not only relax, but learn and work. To cope with the shift to a hybrid or work-from-home environment, many consumers purchased technology products outside the boundaries of typical upgrade cycles, like upgrading TVs earlier than the typical seven year cycle, or investing in home office equipment despite the current age of their devices. These purchases pulled demand forward from future years. Now the technology market is transitioning back to a more normal or even slightly elongated upgrade cycle while consumers deal with building economic headwinds.

For the last two years, the normal seasonal shopping periods for tech products were altered as consumers bought products when they needed them, not waiting for promotional periods to purchase. In fact, fewer products were sold on promotion as consumers became less price sensitive, leveraging In tech, this was especially true as many products were out of stock due to the sudden demand. However, with a return to experiences and building inflation, a subtle shift has begun back toward frugality. A rising percentage of tech shoppers now indicate that they will be waiting for promotions and discounts to buy. The 2022 holiday season could look a lot more like pre-pandemic times, but we expect retailers will look to smooth out demand in the weeks and months leading up to Black Friday, with a reduced volume peak on Black Friday and Cyber ​​Monday proper, as compared to 2019, for example.

Nathan Shipley

Nathan Shipley
Executive Director, Industry Analyst

The automotive aftermarket is less concerned about oversupply, than other industries. While certain industries had inbound inventory for the holidays that never made it in time, and others had inventory that became dated even before it reached the US, those kinds of supply issues do not usually affect our industry.

Recently, we have observed a dramatic decline in discretionary category sales, like accessories and appearance chemicals, which can be attributed directly to higher fuel prices. In the past, we also observed consumers delaying maintenance or stretching out maintenance intervals, which is likely to be happening now, as well. Gasoline supplied is a proxy for demand, so it’s important to note this bellwether declined almost 8%, compared to pre-pandemic 2019. While more people are driving to workplaces again, and they are also embarking on summer road trips, it’s clear that the gasoline demand situation is taking a bite out of consumers’ budgets for aftermarket supplies and other products.

Maria Rugolo

Maria Rugolo
Director, Industry Analyst

US consumers faced higher prices for apparel in January 2022, despite traditionally being the time of year retailers rely on sales and markdowns to get rid of excess inventory. Earlier this year apparel shoppers were faced with fewer promotions, higher prices, and less price sensitivity. Fast forward to June 2022, as retailers look to reset before the holiday season begins. Inflation and other global economic impacts, coupled with an increase in inventory, are beginning to spur more apparel promotions.

Of course, promotions only attract consumers who can spend. Households with an annual income under $ 50,000 will be very targeted in their apparel spending. On the other hand, households with incomes over $ 100,000, which contribute half of all apparel sales revenue, will selectively spend. on deals. These households are currently spending more on apparel purchases, but they are buying fewer products, further proving their selectiveness toward spending.

Beth Goldstein

Beth Goldstein
Executive Director, Industry Analyst, Footwear & Accessories

While logistics challenges have eased, they are still a factor in some areas and will continue to impact inventory flow. Brand and retailer promotional decisions will likely need to be more fluid than in the past as consumer demand remains volatile.

In the months ahead, a return to pre-pandemic behaviors, such as more in-person work, travel, and attendance at events and gatherings, will continue to boost demand for several footwear categories; however, consumers are also likely to be affected by rising costs in other areas, including gas and groceries, which will put pressure on footwear-industry growth this year.

Dirk Sorenson

Dirk Sorenson
Executive Director, Industry Analyst

Across the US sports equipment market, there was a major shift in demand for larger equipment purchases in the summers of 2020 and 2021. Categories like bikes, golf clubs, and cardiovascular equipment experienced major and unique increases in sales revenue growth. However, there has In all categories, these downturns mask the fact that these categories are still dramatically. In all categories, these downturns mask the fact that these categories are still dramatically. larger than they were before the pandemic.

We are returning to a more normal mix of consumption for these activities. Consumers are shifting to a pattern of purchasing items that require consistent replacement. This shift is creating sales revenue share gains for golf balls and losses for golf club sets, as one example. Team sports equipment sales for youth sports are now bouncing back, as those activities are returning to a more predictable calendar. This return to youth sports has resulted in 4.5% growth in equipment for activities like football, baseball, softball, soccer, and la crosse. And the desire to add on to previously purchased bigger items is leading to growth in categories like abdominal trainers, up 22%.

Leave a Comment