Big box retailers are ‘overstocking’ items as consumer demand eases
Empty shelves and sluggish shipping have soured the consumer shopping experience for most of the pandemic. High demand for home goods, apparel, and bigger ticket items like laptops and refrigerators were met with a bunched supply chain, making getting what you want tricky.
Now, however, as Americans are feeling the pinch of inflation stores might have more inventory than they can sell.
“With supply chain issues, the Targets and Walmarts and Best Buys overstocked those things expecting that demand to keep going,” says Karthik Easwar, an associate teaching professor at Georgetown University who specializes in consumer psychology and decision-making. “With inflation, as they are now filling their shelves, we are pulling back. They are overstocking and we are less interested in those products.”
Consumer spending on necessities is still high
Some stores still report that consumer demand is high as ever, says Mark Mathews, vice president of research development and industry analysis at the National Retail Federation.
“Overall, we are hearing from retailers that levels of inventory are very high, but the inventory-to-sales ratio is still low due to high customer demand,” he says. “As long as consumers continue to buy at a record pace, retailers will need to continue stockpiling goods to meet the extremely high levels of demand.”
Regardless, Americans are still spending money, Easwar says. They are just spending it on different things.
“Consumers spending has gone up in the past quarter but it’s gone to necessities,” he says. “It’s gone to food. It’s gone to rent.”
Consumers spending has gone up in the past quarter but it’s gone to necessities.
And for Americans who live in car-centric cities where gas is a non-negotiable expense, soaring fuel prices have eaten up a more significant amount of their budget.
Consumers are also “trading down” when it comes to groceries and other necessities says Kayla Bruun, an economic analyst with Morning Consult.
“With food ingredients, people are moving away from brand names and toward generics,” she says.
Discretionary spending is going to experiences
Some retailers might experience a surplus of goods because certain Americans, mainly high-earners, are reallocating their spending to experiences, says Bruun.
Travel demand, for example, has sky-rocketed as travel restrictions become more lax.
“There is a shift away from goods and to services, which is more Covid-related,” she says. “People were locked down during the pandemic and they were spending more income on things around the home and now they prefer to spend their discretionary spending on goods outside the home.”
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