Too Much…: Overstocks Challenge the Economy

A lot has been made recently of the supply chain challenges and rapidly shifting demand trends messing with ordering as suppliers and retailers hope to have enough, but not too much, on hand. In some cases, too much is exactly what happened.

Some retailers found that the long-awaited grills, camping equipment, bicycles, home office chairs, small specialty cooking appliances, portable pools, and other items that were red-hot in the early days of the pandemic finally arrived from that literal slow boat from China (and after being stuck in offloading lines at ports) just in time for consumer demand to shift to restaurants, travel, and other “post-pandemic” dreams. 

Even if suppliers and retailers could see the shift in consumer demand coming, would it have been fast enough to change these earlier orders? Not likely.

But what to do with stocks that are now not the must-have items:

• Warehouse for next season. However, warehouse space is at a premium right now and costs of goods being delivered are high given still elevated shipping prices. Will it be worth it to store the products?
• Sell it at a discount now. In an inflation-era, deals still abound. But do consumers want or still need it, regardless of the price? And what do these discounts do to consumer pricing expectations going forward?
• Let liquidation companies take it on. This lets suppliers and retailers take some guaranteed money now, cutting their losses at a defined point rather than potentially extended time line where costs could keep rising. It also helps protect against consumers coming to expect deep discounts on a routine basis for brands that would likely prefer to keep some premium perceptions among consumers.

Freedonia analysts continue to watch factors such as stock levels, shifts in consumer demands, evolutions in supply chains, and inflationary trends for direct and indirect effects throughout the economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in the Consumer Goods markets and Packaging industries. Freedonia Custom Research is also available for questions requiring tailored market intelligence.