This could be the year of clearances and deals. Retailers have seen a surge of inventory as they found themselves carrying too much stuff that consumers no longer want so much of, including basic apparel, home appliances and furniture. says The Wall Street Journal (Oct. 5. 2022) in this 4 minute video (click here).
Ahead of last holiday season, retailers ordered with plenty of cushion in mind to prevent empty shelves. Now a bullwhip effect, which we discuss in Supplement 11, could be in store. The latest indication was 
There are broadly two shifts going on that threw a wrench to retailers’ inventory planning. One is a shift from discretionary to essentials, which both Walmart and Target saw. And within discretionary spending, consumers are still spending, but getting pickier with their dollars. Kohl’s, Target and TJX Cos. all said sales in the home category have declined.
Spending instead is shifting to what shoppers need as they go back to the office, attend concerts and travel again such as dressier apparel, makeup and luggage. This isn’t an entirely surprising or alarming picture of consumer health, but low-income consumers clearly are feeling the pinch from inflation, which outpaced wage growth for 5 consecutive months. Walmart, for example, said some consumers are switching from gallons of milk to half gallons. They also are switching away from name brands to private label on categories such as deli and lunch meat.
Retailers with slower inventory turns—such as department stores and apparel sellers—might find current conditions especially difficult to navigate. On average, Macy’s and Kohl’s sold and replaced inventory 3.88 times and 4.34 times, respectively, last year. By contrast, Walmart, Target and off-price retailer TJX all turn over inventory more than 6 times a year.
Retailers were on a high last year when everything—supply chain delays, low inventory, homebound customers and stimulus checks— conspired to feed their bottom lines. A comedown was inevitable.
Classroom discussion questions:
- Explain how and why the bullwhip effect takes place.
- Inventory turns are illustrated in Example 3 in Chapter 11 (see page 460). What do they mean and why are they an important measure of supply chain performance?