Survival requires adaptation, and the past two years have posed Darwinian challenges for retailers.
“Many retailers brought in merchandise early this year to beat rising inflation and ongoing supply chain disruption issues,” says National Retail Federation (NRF) Vice President for Supply Chain and Customs Policy Jonathan Gold.
As a result, many big-name stores now have excess inventory. In ordinary times, inflationary pressures and a glut of inventory would have given off-price retailers like Burlington, Ross, and Nordstrom Rack expanded buying options at lower prices, allowing them to gain more in markups.
However, times have changed, and big-name, non-discount retailers have pivoted. Instead of clearing their excess inventory by shifting it to off-price retailers, most major big box retailers have chosen to clear excess inventory by aggressively marking down items themselves.
That new trend is creating a domino effect, forcing off-price retailers to slash prices even further while, at the same time, trying to improve their product assortment. “The promotional environment has gotten so aggressive in such a short period of time that we need to make the move on [marking down] the goods,” said Ross CEO Barbara Rentler on a Q2 earnings call. “Otherwise, we’re not offering the customer the value that she wants and needs.”
Analysts continue to watch the impacts of inventory on retailers this holiday season. According to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates, imports at the nation’s major container ports are expected to fall to their lowest level in nearly two years by the end of 2022, even though retail sales continue to grow.