For months, the conversation with retailers has revolved around lack of inventory - and for good reason! With consumers struggling to find essentials like baby formula, supply chain issues have been dominating the headlines and crippling consumers. But, that’s not the only story. Hard to imagine we’d be having this conversation months ago, but retailers are now facing ballooning inventories for certain products. While the reason is tough to pinpoint, it’s likely due to a combination of overcorrection and relaxation of supply chain issues, as well as inflation and high gas prices.
How do inflation and high gas prices affect retailers' inventory?
Well, retailers were expecting consumers to spend a certain percentage of their stimulus checks on these goods - but with inflation and gas prices soaring, many Americans are tightening their belts and saving to spend on the essentials, while not spending as much as predicted on things like clothing, TV’s, and appliances.
With warehouse costs soaring, companies like Costco, Gap Inc, Kohl’s, Target, and Walmart are facing astronomical warehouse fees for this oversupply of inventory. To avoid those costs, the companies have made the tough decision to provide deep discounts and rollback prices to get their inventory levels in check. The problem? This will definitely be felt in their projected margins.
Although the impacts may not seem evident to everyone, many will feel the effects of these financial decisions. Investors will see changes in stock valuations, employees will face increased pressure to make smart business decisions, consumers may see an increase in prices, and the businesses themselves will have to re-think the decisions that go into their purchasing strategies to match the changing consumer landscape.
To ensure everyone within these organizations understands and is working to meet the same strategic goals - business acumen is essential. Business acumen will help the teams within these retail giants to be more agile and efficient in their decision-making and give them the ability to align the decisions made in their role, or their department with the overall strategic goals of the organization.
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