US retail industry clears inventory at low prices, domestic sellers suffer losses in order volume

The US retail industry was affected by high inflation and weakening consumer demand, and many retailers began to clear their inventory at low prices. As a result, the number of orders from domestic sellers also declined.

U.S. retailers are clearing out inventory

Due to rising inflation and limited consumer spending power, large retailers in the United States are facing an "inventory crisis." According to data released by several retailers in the United States, inventory levels on many platforms including Walmart, Target, and Macy's rose to varying degrees in the first quarter of this year.

Among them, Macy's inventory turnover rate increased by 9% compared with the same period last year, and its inventory increased by 17% year-on-year. Home Depot's inventory in May this year increased by 31.91% year-on-year. Walmart's inventory level also increased by 33% compared with the same period in 2021, exceeding its own expectations. Target's inventory level increased by more than 40% year-on-year. It is understood that in order to solve the inventory problem as soon as possible, these retailers have taken a number of measures, such as planning additional price cuts for related products in the second quarter and increasing port holding capacity.

From the category point of view, the excess products of these retailers are not concentrated in the categories that sellers think are not selling well. The products that have been hot-selling before, such as garden supplies, barbecue supplies, and summer supplies, are also included, which is quite surprising. In addition, the return rate of some outdoor furniture and electronic products, whose sales soared during the epidemic, has increased, exacerbating the inventory problem. The inventory-to-sales ratio has exceeded that of previous years. A Walmart official once said that it may take several quarters for its inventory to reach a reasonable level.

After realizing the crisis, local retailers adjusted their promotions to other categories, trying to make profits from other categories and offset the costs of inventory overstock. At the same time, they also sold some products to liquidation platforms.

Some liquidation platforms said that in order to ensure normal inventory capacity and avoid secondary risks, some retailers in the United States even choose to pre-order excess inventory before it is put on the shelves, which has led to a continuous increase in inventory on their platforms in recent days. According to platforms such as B-Stock, the demand for outdoor, home and electrical products, which were popular during the epidemic, has subsided.

These retailers said they do not want to create excess capacity or occupy excess capacity, otherwise they would not want to see another round of inventory just after one round of inventory was cleared. Some of the inventory currently being cleared is even from last Christmas. However, for categories with good order volume and strong explosive power such as garden supplies and clothing, retailers are still optimistic, saying that it is just that the current sales timing is not right and the order volume will return to a stable level in the future.

Regarding the "inventory" crisis faced by American retailers , based on their financial reports and related research, it is mainly affected by continued inflation, changes in consumer demand, early large-scale replenishment and supply chain problems.

In June this year , the news that the Federal Reserve raised interest rates by 75 basis points attracted public attention. It is understood that this is also the most aggressive rate hike by the Federal Reserve since 1994. Federal Reserve Chairman Powell also said that there is a possibility of another rate hike in July, which has caused the country's prices to continue to rise, and buyers' consumption expenditures have also been adjusted accordingly.

Currently, the country's consumers' spending on necessities remains relatively stable, but their purchasing power for luxury goods has weakened, and the return rate of clothing products has increased slightly. These changes are beyond the expectations of retailers.

In response to the "pain" brought by the market , these retailers have not only made appropriate adjustments to sales categories, but also strengthened adjustments in terms of prices and external monitoring. The phenomenon of "low-price disposal" has also become more common. For some slow-moving products, selling at a low price is obviously the fastest way to deal with them. Excess inventory not only puts pressure on their future sales, but also increases inventory costs, and there is an imbalance between supply and demand in terms of purchasing. In general, the phenomenon of inventory backlog cannot be effectively solved in a short period of time.

Clearing inventory at low prices causes domestic sellers to suffer losses in orders

The "side effects" of inventory clearance in the U.S. retail industry not only affect the local market, but the indirect impact on domestic sellers cannot be underestimated.

In fact, the recent decline in orders reported by many sellers is a "side effect" of the current changes in the overseas market. Buyers have increased their efforts to purchase discounted goods from local markets, causing the consumption enthusiasm in the overseas market to "cool down" and the demand for related categories to change.

The clearance of inventory by US retailers means that local consumers have more opportunities to obtain discounted goods locally, which will have a certain impact on sales on other platforms and channels. Although overseas consumers have formed the habit of online shopping, with limited spending power, low-priced and fast-acting products will be more popular with them, and the local advantages of retailers such as Walmart and Macy's will be highlighted.

With the arrival of Prime Day, these retailers with overstocked inventory may cut prices again or offer more attractive discounts to attract more traffic and solve the problem of high inventory. In a related survey, some retailers have stated that they will focus their promotions this year on slow-selling products to maximize inventory clearance.

A large number of "low-price" promotions are obviously a good time for local buyers to shop. The promotional discounts of major retailers in the United States have increased significantly compared with previous years. Walmart's technology products have increased by about 15% compared with the previous year, and Macy's has promoted more than half of its products...

In view of the overstocking and low-price promotions in foreign markets, some domestic sellers have realized that they need to be cautious in stocking up. As the seller said, they are now in a dilemma: "If I stock up too much, I am afraid that I can't sell it, and then I have to clear the inventory. If I stock up too little, I am afraid that there will not be enough." The seller also added that there will be no more replenishment of some categories with poor sales at present, and there is no need to try too much for things that local retailers are struggling to sell.

As for the previously popular categories, some sellers believe: "We still need to prepare, and the long-term hot-selling trend of these categories will not change much for the time being." Therefore, the measures currently taken by these sellers are mostly to prepare an appropriate amount of goods while ensuring sufficient supply. They believe that there are indeed certain risks in preparing a large amount of goods, and they should not be taken lightly. In this regard, sellers need to fully realize the hidden dangers in the market, and when the "low price war" has already appeared in the US domestic market, they should promptly adjust the strategies of various links such as product selection and preparation, and strengthen their existing advantages and strategies.