After the famine, the flood. The last two years have been hit by a shortage of supplies, with retailers just in time struggling to ship their products, electronics makers looking at the shortage of computer chips and supermarkets struggling to fill their shelves. Now, some retailers are struggling with the opposite problem: a deluge of things no one wants to buy.
Some of the largest retailers in the United States have nearly $ 45 billion in excess stock, according to Bloomberg, 26 percent more than the previous year. This is the result of the struggle of retailers to avoid the scarcity that marked the beginning of the pandemic and then they could not anticipate a slowdown in consumer spending as the world opens up. Now, in an attempt to change volumes and reduce losses, companies like Target, Gap and Walmart are relying on deep price cuts.
Many retailers are facing the problem Amazon faces in its recent first-quarter results: trapped with a flat foot when it hit Covid, they planned an increase in demand that hasn’t materialized. For Amazon, this has meant too much empty warehouse space. For others, the opposite is true: too many things and not enough space to store or sell them.
Costco has an accumulation of Christmas-themed items that didn’t arrive in time for the last holiday season and plans to put them on the shelves this year, but prices for other items are likely to be included, including TVs. popular big screen during lock, fall. Meanwhile, those pajamas to which innumerable inches of spine were devoted in the early stages of the pandemic are now likely to be profoundly reduced, along with other fashionable leisure garments during confinement.
“It really starts with the pandemic,” says Lisa Ellram, a distinguished professor of supply chain management at the University of Miami, Ohio. “Retailers didn’t know what to do.” Between February and March 2020, retail sales fell 9 percent in the U.S., and fell another 15 percent a month later. But by June 2020, retail had returned to pre-pandemic levels and has continued to rise ever since. “Things went up a lot, and they couldn’t meet the demand, because people had stopped buying things and all of a sudden people wanted things,” Ellram says. “There were all these weird and unexpected changes in demand that took many companies by surprise.”
These changes in demand coincided with some of the worst supply chain disruptions in recent history. “People had purchasing power and couldn’t buy many of the services they normally consume, so they bought goods,” says Marc Levinson, author of two books on shipping containers. Levinson was one of them: he bought a sofa; then he waited nine months for it to be delivered, as the Covid outbreaks closed the Chinese ports and the Suez Canal, through which 12 per cent of world trade passes, was blocked by a very large ship.
With delays and disruptions as the norm, companies struggled to avoid future shortages by buying excessively and holding local stocks instead of relying on the increasingly broken supply chain just in time. Others have spent a lot of time completely redoing the supply chain. Intel, for example, has said it will build a $ 20 billion chip manufacturing site in Ohio to alleviate shortages due to the supply chain.