This is small consolation in the face of soaring prices at the pump and at the grocery store, but consumers could get some respite for some consumer items, which retailers have overstocked.
In response to shortages and supply chain disruptions, many traders have changed their strategy, says associate director of logistics consulting firm GCL Group, Charles-Antoine Marcil. “To deal with shortages, we have moved from a ‘just in time’ mode to a ‘just in case’ mode. Companies decided to accumulate more inventory because they had difficulty predicting the number of products they were going to be able to have.
American retailers, such as Walmart and Target, recently warned their shareholders that they had hoarded too much product. Their managers claimed they didn’t have the right products in stock because they had arrived late and because consumer habits had changed due to deconfinement and rising inflation.
In May, Walmart said nearly 20% of its inventory items were products the company no longer wanted. At Walmart Canada, its spokesman, Jon Rumley, said he was unable to comment on the situation for the retailer’s Canadian operations.
The accumulation of surpluses comes at a time when recession fears raise questions about the ability to dispose of inventory, said Marcil. “We talk about a recession, we talk about a slowdown. Are we going to be able to sell off all that stock? Storage capacity at a certain point, it is limited. There will be questions about products that are no longer in season and, at this time, the sales can be a way to get rid of certain products.
Sales in Canada?
In the United States, experts are expecting massive sales in July on some items that have fallen out of favor with consumers. Households are concerned about inflation, but they are also regaining a taste for certain expenditures abandoned during the pandemic, such as concerts, travel and outings. “There will be deals like you’ve never seen before,” predicted Moody’s Investor Service retail analyst Mickey Chadha in a recent interview with wall street journal.
Among the items accumulated in excess, there are popular products during the pandemic, including bicycles, outdoor furniture, electronics and sportswear, lists Alain Sawaya, supply chain partner in advisory services at KPMG Canada. “I remember very well, 18 months ago, there were no more bikes. Now there is a surplus of bicycles, ironically. It turned as fast as that.”
However, the situation would be less marked in Canada, nuance Mr. Sawaya. Major US retailers took advantage of their buying power to stock up on items. This strategy has ensured that less inventory is left for smaller companies, especially Canadian retailers, he explains. “In Canada, we experienced a bit the same thing. We have a surplus, yes, all the same not badly, but a little less because we just bought less from the start, either because we were able to store less, the giants having done so before us, or because ‘we just didn’t have the space or the people to do it.”
Among Quebec hardware stores, we do not yet feel a return of the pendulum, notes the president of the Quebec Association of Hardware and Building Materials (AQMAT), Richard Darveau. “As we speak, in all the chains with which I spoke, we know that it happens elsewhere [la diminution de la demande et les surplus de stocks]but we don’t feel it in Quebec.”
Like other retail sectors, hardware stores have received late orders due to the supply chain, but these delays have not resulted in lost sales for merchants, he said. “It’s true that we had delays in deliveries, but people are patient, and sales are made a little later.”
Spending on renovations and construction is not immune to a possible slowdown, however, warns Mr. Darveau. He points out that rising interest rates are driving up the cost of financing renovations for many households. “I feel like we, too, are going to have a downturn at some point, but we don’t see it yet.”