Market Update: Now We Have Too Much Sh*^

Fading in the recent past were concerns of stores not having enough stuff to buy the family during Christmas, or the home supply store running out of lumber for contractors, or exercisers not having enough home gym equipment. Consumers shifted back to services spending, leaving demand for stuff lower. And that stuff is piling up. We suddenly have too many toys, clothes, exercise bikes, and TVs. Unless they find a loving home, there isn’t space for them in stores and warehouses. 

What the…?!

When toilet paper was in high demand, people started hoarding and buying much more than they needed, because images of empty shelves created a scarcity effect. That and our disdain for itchy butts. The high demand created a downstream impact on toilet paper makers. Imagine Costco, Walmart, and Target, all ordering unnaturally high amounts of toilet paper all at once. Charmin, Cottonelle, and others suddenly need to produce more toilet paper. Before they can, they all must order raw goods such as cotton and paper that go into manufacturing toilet paper. Each step up the supply chain magnifies because there are fewer manufacturers and even fewer suppliers. This is called a bullwhip effect.

The initial rush of orders will create a bottleneck that works its way through the supply chain. In a lot of cases, once the orders are in, they’re in. When consumers decided they didn’t need that much toilet paper, the producers were still in the process of making toilet paper. Once the product is finished and packaged, it goes to the retailer - whether there’s a buyer or not. 

Port congestion is becoming an issue for a different reason than in 2021. Retailers can’t find homes for furniture, TVs, and other bulky goods so they’re leaving containers on port.

Shortages are still concerning for certain products like baby formula, and supply chain bottlenecks are ongoing. So, it wouldn’t be a surprise to see empty shelves here or there. The best way to think about the inventory glut, and the best deals, is to consider what was in highest demand during the pandemic. There are currently aggressive discounts in certain categories like toys, furniture, and home goods. 

Some retailers are asking customers not to return refunded items, otherwise known as the “keep it” option. It’s likely temporary but shows how little space is left in stores. 

Supplier orders are being canceled. This can only go so far because these types of orders are typically tied to a contract. The suppliers who agree to take their stuff back suddenly have a glut. Consumers should start to see markdowns on name brands if they haven’t already. 

Inflation is still eroding buying power so the last thing most people want to do is buy discretionary items. But that’s really the only thing that’s been piling up. Unfortunately, there isn’t a glut of gasoline or food yet. 

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