Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio.
I would like to talk about the theme from the Wall Street Journal, “Problems North American Retailers Are Having with Orders Ahead of the New Year’s Holiday.”
Daily Logistics Radio by IINO san in 21st Dec. 2021
Overstocked in Retails at North America
In North America, orders are flooding in ahead of the year-end and New Year holidays, and it is reported that there may be a surplus of untimely products due to delayed delivery.
We can see that the delay in delivery is due to the disruption in the supply chain, but the point is that there is a surplus.
Currently, they are ordering in large quantities because they cannot see the delivery date.
If they place orders only for what they need as they have done in the past, the delivery date will be delayed and the next order may also be delayed, which may lead to a longer period of zero inventory.
One retailer said, “We have tripled our orders for the holiday season because it is more dangerous to lose sales opportunities with zero inventory,” and continued, “But it is unclear if this will arrive on time.”
On the contrary, another retailer remarked, “We would rather have too much stock than not enough,” and some companies seem to have done well with delivery.
Importance of The Fourth Quarter of the Year
Currently, there are problems as follows:
-Changes in the supply chain
-Covid-19 Omicron stock
It is unclear how much of an impact it will have on shoppers.
For retailers, the fourth quarter is the time when sales and profits are at their peak, so this is where they bet on.
If they don’t have inventory here, they will lose a big opportunity.
A supply chain professor at the University of Tennessee said, “If you go over budget, people will be mad at you, but you’ll still have a job come Monday. And the tendency is to make sure that we don’t stock out.”
Labor costs are also rising in North America, so they cannot afford to keep workers idle.
Therefore, there is a possibility that there will be a surplus of inventory and a large amount of unseasonal products will be available in the New Year.
Excess Inventory Risk of Seasonal Products
Deep-pocketed companies such as Wal-Mart, Target and Home Depot, say that their inventories are in good shape after loading up early on products and even chartering ships to ensure items arrive in time for the holiday peak.
The risks of overbuying are high for retailers that sell a narrow range of products or goods that age quickly, such as fast fashion or Christmas sweaters.
In surveys by Morgan Stanley, more than 50% of companies including retailers said in each of the first three quarters of this year that they planned to increase inventories.
Executive director of Massachusetts Institute of Technology’s Center for Transportation & Logistics said, “If you’re a midsize retailer, you have to decide what demand will be in Christmas in about May,” and “Forecasting for demand is just kind of out the window during the pandemic.”
Shipping Market in 2022
If the supply chain is still disruption in July and August next year, there is ahigh possibility that retailers will place more orders. We can expect similar space shortages, higher freight costs in the fourth quarter of next year.
As for the excess inventory, many items may flow into discount chains and be sold at a discount. On the other hand, not all retailers are willing to heavily discount their outdated inventory, according to the article.
The warehouse costs may be passed on to the selling price for storage.
The article said, seasonal items such as outerwear and boots may sell for closer to full price in January than they would normally.
The simple fact is that many companies will sell their products at a lower price.
However, it is also possible that they will sell them at a higher price due to the added storage costs, and prices will remain high.
It’s a little hard to tell what will happen.
The shipping market is greatly affected by the North American economy, so I will continue to send out information including news from the Wall Street Journal.