But some of that merchandise arrived late because supply lines are still being impacted by Covid-19 lockdowns in China, which have shut down major ports, CNBC reports. Walmart reported in May that its inventory increased about 33 percent as the company made aggressive purchases to keep shelves stocked. “These retailers have come out and reported that they have too much inventory and not the right type of inventory on hand,” she tells KCM. The big ones - like Walmart, Target, and Amazon - “loaded up their pipelines with incoming inventory, created an enormous expansion in physical space, and hired hundreds of thousands of people” to meet this unusual demand, he says.īut that frenzy has ended, and some companies are now feeling the sting of the bullwhip, industry expert Cathy Roberson explains. Retailers went into hyperdrive to satisfy that shift, Cohen says. Demand for items like suits and formal wear dried up as people abandoned offices, while the need for things like cleaning supplies, home-gym equipment, and furniture surged. Consumers began to hoard as panic set in (which, as we all remember, led to the horrors of the toilet paper shortage).
In 2020, when the virus brought the world to a standstill, products weren’t being assembled and things weren’t being shipped. “But Covid was this all-encompassing disruption that just completely overwhelmed the world in a way that we haven’t experienced since World War II.” “Feast or famine issues with inventory aren’t new,” Cohen says. That distortion gets passed along, and is typically amplified, at each step of the supply chain, creating inefficiencies like long wait times for products and the surplus we’re seeing now. The term describes how businesses tend to react to a surge in demand by over-ordering to avoid shortages. Companies are stuck with too much stuff, their warehouses are full, and they’re taking some creative measures to get rid of that excess inventory, according to Mark Cohen, the director of retail studies at Columbia Business School.Įconomists call this phenomenon the bullwhip effect. Now, the pendulum has swung the other way. Three rounds of stimulus checks and the promise of new Covid-19 vaccines had primed consumers to go big for the holiday shopping season, but a gummed-up supply chain and a labor shortage left retailers scrambling to meet the soaring demand.
Walmart instock items full#
Also to its credit, by the middle of this year, it was willing to discount the merchandise it knew it would struggle to sell at full price, figuring it was better to take some lumps early than to let goods age on store shelves.Think back to the winter of 2021, when stores struggled to keep shelves stocked with everything from Xbox consoles to artificial Christmas trees. To its credit, Walmart boldly procured fresh inventory late last year and early this year, responding to what it thought would be brisk demand coming out of the pandemic. Profit margins are typically paper thin in this business (Walmart's net profit margins were a scant 3.4% of revenue last quarter), so even the slightest misstep on the merchandise front can take a serious toll on the bottom line. One of the more important but underappreciated aspects of retailing is having the right merchandise in the right place at the right time at the right price. Stock levels are still uncomfortably high, particularly now that we're headed into cooler weather and the holiday shopping season. Well, if you think the world's biggest retailer got rid of as much inventory as it would have liked to, however, think again. Specifically, CEO Doug McMillon explained during May's quarterly earnings call that the store chain intended to "work through most or all of the excess inventory over the next couple of quarters" but also warned that "we expect some gross margin pressure in Q2." And investors did get a slight taste of those markdowns for the recently ended quarter, but only a slight one.
Three months ago, Walmart ( WMT 0.50%) shareholders were led to believe the company would be able to pare back its then-sky-high inventory levels, even if it took a bit of a toll.
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