What are retailers doing with excess inventory?

It’s being sold – though not necessarily at the prices they expected
Peter Johnston
NRF Contributor

Given everything, you’d think retailers at this point in the year 2020 would be staggering under the weight of unsold inventory. The reality? Well, it’s complicated, says overstock expert Brett Rose. Hopeful, but complicated.

By the middle of January, the COVID-19 pandemic was already the major news story of the year. By late February it was recognized as a major national health crisis, and activities that required people to crowd together in large groups began to be suspended or curtailed. One of those activities was shopping; according to the Department of Commerce, U.S. retail sales dropped 8.7 percent in March, and another 16.4 percent in April.

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After a stressful early spring, U.S. retail sales increased 17.7 percent in May and another 7.5 percent in June. July was only up 1.2 percent above June, but it was also up 2.7 percent over July of 2019. A major factor in this turnaround was ecommerce: If people can’t go out to stores, they’ll buy online. According to a recent report from Adobe, ecommerce in May was up 77 percent compared with May one year ago.

What about all those lost sales in the early part of the year? And what about the product that never will be sold, such as branded merchandise for professional sports teams that have decided to change their names?

There must be a mountain of unsold goods out there — out of season now, and maybe unsaleable — dragging down the value of everybody’s inventory. It was only two years ago that brands made headlines by destroying hundreds of millions of dollars’ worth of unsold merchandise to maintain exclusivity. Are the fashion fires burning even now?

Buyers and sellers

Probably not. “I can see why a high-end brand like Burberry might use this tactic,” Rose says. “However, we have worked with numerous brands to move their unsold merchandise to Central and South America so it does not impact their U.S. sales and value proposition.”

Rose is founder and CEO of United National Consumer Suppliers, which basically serves as a global middleman between retailers and suppliers. If a retailer is overstocked, UNCS will find a buyer for the overstock and move it out. If the retailer is understocked or gets a last-minute order, UNCS finds them a source.

On the brand side, UNCS helps suppliers find new sales channels, seeks new opportunities for them and facilitates delivery. If there was a mountain of unsold and unsaleable goods out there, Rose would know, because somebody would be asking him to move it. And, he says, they’re not.

“The retailers are moving product through,” he says. “They’re not necessarily moving it in the manner and at the price point they expected, but they’re moving it. Now it’s August, and we’re not finding ourselves with a slew of last-season merchandise. In fact, we’re anticipating that some categories — toys, cleaning supplies and some food products — will experience shortages that could negatively impact Q4 sales.”

What about product theoretically doomed at birth, such as merchandise for the Washington football team? There is, Rose notes, no shortage of merchandise branded with the old name for sale online, and sports fans tend to be fiercely loyal. A recent thread on the team’s message board turned up twice as many fans who say they will continue to wear the old name as fans who say they will not. It may take a little longer and involve a little more discounting, but the old merchandise will sell.

A year like no other

“I’m an entrepreneur-in-residence with some college kids,” Rose says, “and a question one of them asked me yesterday — which is the same question I get asked by the news networks — is, how can you quantify and characterize this year? What can you compare it with? I don’t know. I certainly think you can compare it with, say, 2008 through 2012 in terms of the consumer’s financial situation. It’s easily quantifiable that way.”

But beyond that it’s a new game, and one that might favor retail. “It’s a very uncontrollable world right now,” Rose says. “We can’t go out. We can’t go to a restaurant. But one thing the consumer can control — almost — is gratification. You can make a purchase. If you don’t want to go to a store, you can do it online. And people are doing that.”

Just how many people will be able to continue doing it depends heavily on how many people are unemployed in the fall and what kind of government financial support they will receive. In announcing a 9.3 percent sales increase for the second quarter, Walmart noted that stimulus money helped boost sales of general merchandise, making it uncertain whether it and other large retailers will be able to keep up their sales growth if policymakers do not restore the benefits that expired at the end of July.

The importance of agility

When asked what all this portends for the long-range future of retail, Rose says, “What it really goes back to, I think, is that retail is like any other business. You have to be agile. You also have to be flexible. We learned that in 2012 — Louis Vuitton and Chanel and all these big brands are still here, right?

“But I do think that now more than ever, the industry needs to realize there are educated, intelligent consumers in the market. And they know what’s going on. If they weren’t affected by the events and the turmoil of this year, somebody they know was affected. Somebody they know is having trouble making ends meet right now,” he says.

“I think the world is going to turn back on quickly. Once a vaccine is out there and proven, the floodgates are going to open. People want to get out and they will, and the dust will settle. But I think we’ll be a little bit different as a society. I think some of us won’t ever truly forget — which we shouldn’t, because too many people paid the ultimate price for it.”

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