Skip to content

Blog

A Retail Inventory Tsunami is Coming!

Over the past few months, we have all heard the news surrounding the backed-up supply chain and the number of container ships awaiting unloading at the ports of Long Beach and Los Angeles. Ports in Canada, China, UK, and around the globe are seeing similar congestion. The situation in the U.S. is finally getting better with a 41% reduction in aging cargo over the past two months, but the prime holiday season of buying and giving gifts has passed. So, just exactly what does this mean for retailers?

Retailers, the good news is that you are finally going to get that merchandise you ordered for the holiday shopping season. The bad news is that it is getting there too late. Christmas and Boxing Day have passed. Even one day late is too late when it comes to merchandise planned for holiday sales. What are you going to do with all that inventory once it arrives?

With close to 100 ships awaiting berth and unloading, each carrying as many as 24,000 containers, the quick math of 2.4 million containers arriving after the holiday season is a sobering thought. Those 2.4 million containers will be delivered and when they do, the result will be merchandise that was intended for the end of year holiday season, but it will arrive in the first quarter of 2022. The real result: a tsunami of inventory glut is on its way to retailers of all sizes.

There are several key issues that retailers will need to address. What should be done with this excess merchandise? Store it? Well, that’s real inventory consuming precious working capital and open to buy budgets, and then there is the cost of the container rentals as well as real estate to house hundreds or thousands of containers. Send it to the stores? What inventory should be sent to which stores? When the inventory arrives, it will require price reductions in the form of promotions or markdowns to encourage customers to purchase products in the first quarter of 2022 that were intended for the 2021 holiday season.

Fortunately, there are sophisticated AI-powered consumer demand solutions that can identify inventory-selling opportunities and markdown/clearance pricing that will motivate consumers. These systems can determine what to liquidate, where to sell the merchandise, and how fast to discount based on revenue, profit, and space considerations. Traditional, non-AI-powered solutions cannot address this challenge as those systems rely on history to make recommendations. Because this is an unprecedented situation that has not occurred in the past, a near real-time understanding of consumer demand is required to recommend the absolute best options that address these significant issues and maximize revenue and profitability.

Considering the applications across the lifecycle pricing spectrum, markdowns and inventory clearance are the fastest to stand up and put into production. Across decades of experience, I cannot recall a time that was better suited for markdown and clearance optimization powered by AI (Artificial Intelligence) and machine learning. Retailers today can minimize their exposure, sell through this glut of inventory, and improve their market position for the balance of 2022 with profitable growth by immediately implementing autonomous solutions to address these challenges. The inventory tsunami is coming. If you have merchandise on ships waiting to unload, you need to prepare now.


About DemandTec:

A pioneering leader in retail pricing, promotion, and markdown technology for decades, DemandTec is ushering in the new era of unified autonomous merchandising. With Unify by DemandTec — the industry’s first — retailers can unite their data, systems, internal teams, and collaborate with suppliers to generate profitable revenue growth with the power of AI.

From food to fashion, DemandTec partners with more than 700 customers around the globe. To learn more, please visit us at www.demandtec.com.