Being over prepared has left some retailers with high inventory and a need to discount.
The key details
At the start of the pandemic, many retailers were plagued with inventory shortages. In anticipation of continuing supply-chain issues, many overstocked products, and now can’t sell them quickly enough.
Inflation is partly to blame for their stockpile. Consumer demand for products has fallen as buyers are spending more than usual on essentials. And now with pandemic restrictions mostly waived, consumers are spending money on travel, concerts, and other experiences.
The inventory stockpile has resulted in additional sales from multiple large companies. Walmart, Target, and Sleep Number have announced sales and markdowns.
During the pandemic, consumer interests shifted. Peloton bikes, for example, were extremely popular. Anticipating that popularity would remain, the high-end, indoor-bike maker moved production from overseas locations to the U.S., spending hundreds of millions of dollars.
When the shutdowns lifted, interest in Peloton bikes fell and the canceled its manufacturing plans and just today announced layoffs and a price increase, The Wall Street Journal reports.
Why it’s news
It’s a telltale sign of what the vacilitating economy has done to businesses over the last two years. As retailers are forced to sell products at reduced prices, overall profit margins will be smaller. Target and Walmart warned investors that their profits would be lower by the glut of inventory.
While an increased number of sales might be nice for consumers struggling with inflation, the tighter profit margins could have negative effects on businesses preparing for recession.
“They’re basically going to come out of the gate on sale,” says indoor-bike maker ElliptiGo CEO Bryan Pate.