14/07/2024 1:55 PM

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4 Ways Warehouses Are Surviving the Holiday Inventory Glut

4 Ways Warehouses Are Surviving the Holiday Inventory Glut

Retail warehouse space during the holiday season is absolutely essential. The busiest time of the year typically sees retailers increase their inventory three to four times normal just to meet consumer demand. This year’s inventory glut created a tricky situation for the retail market. U.S. retailers saw a record $732 billion of inventory in 2022, up 21 percent from last year.

Joe Crews, owner and consultant of Key Warehouse Solutions, discusses the issue of warehouses acquiring too much inventory. “As many companies are still receiving goods that were delayed from last year, warehouses are [now] busting at the seams.”

When inflation peaked at 8.5 percent in July from the previous year, consumer spending all but dropped. Non-essential items retailers had stockpiled, like kitchen appliances and electronics, took a backseat to more fundamental products, like gas and groceries. And like a game of musical chairs, the music stopped and retailers were left standing with huge piles of inventory. As a result, warehouse space became extremely limited.

“Once it’s already bought, once it’s in your warehouse, once you own it as a retailer, you need to manage it,” says Brandon Rael, business transformation leader at Capgemini Invent. “Otherwise you’re losing space in the warehouse.”

Without the space needed to store incoming items for the holidays, retailers have had to take drastic measures to move products out as fast as possible.

“Retailers have to get creative and get as much money back from that product as possible,” states Crews.

Both Crews and Rael say this can happen in several ways:

  1. Promotional Sales: This is probably the best option retailers have to move inventory out of warehouses. Stores like Target took the lead to move overstocked inventory with aggressive deals, like an early Black Friday promotion in October. However, Rael says retailers “take a margin hit” when they’re forced to sell products at less than full price.
  2. Selling to Discount Retailers: As retailers continue looking to offload excessive inventory, businesses like TJ Maxx and Marshalls will see a growing supply in merchandise. Inventory liquidation company Channel Control Merchants added an additional 25 retailer clients in eight month this past year due to the influx of products.
  3. Hold Onto Items: This isn’t ideal but it can work for some seasonal products that can be cycled back through stores next holiday. Items that go out of trend quickly, like apparel, aren’t as lucky. It’s important to remember the longer retailers hold onto dated and seasonal items, the more they’ll have to mark down the price.
  4. Dumping Items: This is an absolute worst case scenario. If warehouse space is needed and inventory won’t sell, items can be thrown away. Unfortunately, some retailers will do this if it costs more to store inventory than to keep it, especially if the chances to sell it continue to drop. However, in this case brands should consider donating excess inventory to help both needy consumers and their brand reputation.

Crews says in the end, it all depends on which route retailers want to take. “There are wide networks where retailers can dispose of products … and there’s not one solid answer that can be universally applied.”

Retailers will have to find the solution that best fits their business. As they continue processing through the excess inventory they’ve acquired, the forecast for next year is open to developing a completely new outlook.

“This is a time for retailers to course correct and see what they can do differently in the future,” says Rael.

This post is part of a longer article. You can read the full blog post here.

Alaina D’Altorio is the content marketing specialist at Smith Corona, a manufacturer and seller of thermal labels, direct thermal labels, and thermal ribbons used in warehouses for primarily barcode labels.