Let’s imagine for a moment that you had a retail stand in the local market and you specialize in selling hammers. For a period of 90-days, you experience a high level of demand that you cannot meet. It turns out that the 90-day demand for your hammers was 10,000 units, but you were only able to source and sell 1,000 hammers.
Now for the next quarter, you decide to stock up on 10,000 hammers, but in the next 90-days, the demand for your hammers has actually decreased and you were only able to sell 2,000 units and now you are overstocked with 8,000 hammers.
What do you do next? You probably do everything you can to sell out the excess hammers in the next quarter, so you can convert these hammers back into cash. This means that you will probably position to sell the hammers with a significant discount and position them with clearance pricing.
This is more or less the current position of many large and small retailers in the US market. They are experiencing a pretty significant inventory glut that they have to get rid of and convert back into cash.
There were a few reasons for the soaring demand for many consumer products since the covid-19 outbreak that affected the current inventory glut problem. People were stuck at home so they aggressively shopped for electronics, gadgets, cooking equipment, toys, games, and more. The sudden spike in demand was extremely hard to meet for many retailers and manufacturers due to covid-19 restrictions that caused shutdowns in many industries, but also due to global supply chain constraints that snarled delivery dates.
This caused many retail businesses to overstock inventory due to all the complications and for the fear of stocking out and missing out on increased sales momentum. However, the pendulum has now swung back the other way and the high demand for the goods was simply no longer there. When covid-19 subsided, people in the US began to focus more on travel, going outdoors and experiencing the routines of normal life.
The upcoming Black Friday and Cyber Monday (BFCM) shopping season will be a major opportunity for all businesses suffering from an inventory glut to provide heavy discounts and real bargains in order to entice US consumers to jump on the opportunity and enjoy deep savings during the holiday shopping season.
It will be really interesting to see how the BFCM sales numbers turnout this year. Many hope for strong sales numbers to kick off the holiday shopping season with great momentum. Others fear that the numbers will be soft, which will signal a setting for a pretty grim holiday shopping season that might end on a low-key mirroring a challenging year for the US economy that included turbulent financial markets and historically high levels of inflation.
My hope is that US consumers will take advantage of hopefully aggressively low pricing this holiday shopping season, and give the US economy a good lift towards the end of the year. If the inventory glut will be properly reduced this holiday shopping season, it will mark a proper reset for the US economy which is about 70% based on consumer spending. A proper reset will hopefully mark the way out of the turbulence of inflation and volatile financial markets.
So if you find a good bargain for a product you like and need this holiday season, make sure to grab it, you might not find such bargain deals for a long time. Remember, inflation is still here unless you chase it away by being bullish on your shopping this holiday season.
Written by Yoni Mazor – Co-Founder & CGO of GETIDA
