Managing inventory, the new headache for American companies

Late deliveries, products that no longer find buyers, growing uncertainty about the economy: for American companies, small or large, managing inventory after two years of consumption completely turned upside down by the pandemic has become a delicate exercise. .

“We have way too much inventory right now,” says Ginny Pasqualone of Sparkledots, a small company that makes children’s clothing.

“It is important to have a wide selection of goods to meet the needs” of traders, she explains to AFP.

But the latter are worried about seeing their own customers “no longer coming to their stores because they have to spend more money on food or gasoline”. Some are “fearing they won’t be able to survive another recession” and don’t order as much anymore.

Sparkledots has enough space to store the goods but until they are sold, “I can’t hire or go to a new trade show”, remarks the entrepreneur who employs 18 people. “It undermines our growth.”

Large chain stores such as Walmart, Target or Macy’s have recently admitted that they have misjudged the changes in habits of their customers and end up with surplus household appliances, casual clothing or bicycles.

– Unprecedented –

Some cycle distributors “bought everything they could as if demand for the bikes was going to stay at an all-time high,” observes Wayne Sosin of Worksman Cycles, a New York-based company that has made a name for itself with his trolley tricycles. But “it was obvious that (this) could not last”.

That said, adds Sosin, demand for certain models like e-bikes “remains strong”, and with a supply chain still fragile, “it remains difficult to find certain parts”.

American consumers, confined to their homes by the pandemic and helped financially by the government, began to buy many more goods as early as 2020.

The supply chain has not kept up and businesses have for months had to deal with shortages of certain items or congestion at ports.

“They have, on the one hand, had to adapt to the idea that they could no longer count on an immediate supply allowing them to have limited stocks”, remarks Phil Levy, economist for the transport company Flexport.

At the same time, they had to ask themselves “to what extent the strong increase in demand for goods was permanent”, he adds.

Companies generally make their forecasts based on past trends, he recalls. But “we have no data on consumer behavior during the last five pandemics”.

– More promotions –

The supermarket chain Target, for example, had predicted that demand for household goods and clothing would slow in favor of spending on services.

But “we had not anticipated the magnitude of the turnaround,” admitted his boss, Brian Cornell, during a conference call at the end of May.

Result: the group ended up with many more appliances, TVs and garden furniture than expected.

Macy’s department stores hadn’t properly assessed the 20% drop in sales of casual wear, sportswear or home linens between late 2020 and early 2021, boss Jeffrey Gennette admitted when posting. of the latest results.

“At the same time, the constraints in the supply chain eased, and we received more goods than expected,” he noted.

To manage these surpluses, the strategies diverge.

Rather than cramming the items into stores, Target sought out temporary storage spaces. More trend-sensitive items have been dropped.

Others are betting on discounts, like the clothing store chain Urban Outfitters whose boss, Richard Hayne, anticipated at the end of May “an increase in promotional operations not only in the second quarter, but throughout the year”.

The evolution of consumption “remains unpredictable”, estimates Brian Yarbrough, distribution specialist for the company Edward Jones.

With the return to travel and outings, and with inflation setting in, habits have changed.

But Americans continue to spend for now, he notes.

And for businesses that already want to make sure they have items on the shelves come fall, will shipping time between Asia and the US get better or worse? Will it be made worse by a possible strike by Port of Los Angeles dockworkers? “We just don’t know,” notes Phil Levy.