The U.S. retail industry's "inventory crisis" remains unsolved, with multiple warehouses experiencing severe overstocking

It is learned that according to CNBC, as large retailers such as Walmart and Target are caught in an unprecedented inventory crisis, warehouse capacity across the United States remains tight and excess inventory continues to accumulate.

Warehouse rents soar as capacity runs out

According to the latest Warehouse Price Index (WPI) from Warehouse Quote, the tight warehouse capacity situation is not going to change quickly. The vacancy rate for warehouses nationwide is about 3%, while in the port market, available space is about less than 1%.

Ben Hagedorn, CEO of Warehouse Quote, noted that before Walmart announced a profit cut this week, rent prices for warehouse space in the U.S. had increased 20% year-over-year, with imported goods taking up a large amount of warehouse capacity.

According to Hagedorn, the merchandise stored in the warehouse is mostly typical seasonal items and durable goods such as appliances.

“Durable goods are sitting around a little longer than originally anticipated, in addition to the carryover from last year’s holiday season, which is also the time of year to build inventory for holiday sales ahead of time,” he said.

The WPI showed warehouse price increases in the Southwest and Northeast leading other regions. Goods historically stored in California were shipped elsewhere, including to Arizona, Texas and New Jersey, causing price surges in those regions.

One WPI participant on the West Coast said the biggest difficulty they are facing is finding additional industrial warehousing space to support and handle the volume of containers they are seeing.

Slowing demand is the main culprit

As demand slows, excess inventory caused by misjudgment of demand during the pandemic and holiday season last year is still stuck in inventory. In addition to excess inventory, retail giants are also suffering from declining profits.

Walmart this week cut its quarterly and full-year profit guidance, showing the impact of inflation on consumers and shifting spending patterns. The company said it had to cut prices at its stores to clear out excess inventory.

The move comes after Target cut its second-quarter earnings outlook last month, blaming excess inventory and falling demand in specific categories such as small appliances.

However, other major retailers that reported high inventory levels said the excess stock was not a problem for now and they would not slash prices to clear out stock.

In late May, Dick's Sporting Goods reported that inventory levels as of April 30 were up 40.4% from a year earlier, but it described the levels as "healthy."

Labor shortage affects warehouse operation efficiency

The report pointed out that in addition to slowing consumer demand, labor shortages are also affecting warehouse vacancy rates across the country.

Midwest warehouse WPI Network Partners said labor rates increased 23% year-over-year (Q1 2021 to Q1 2022). In Michigan, labor shortages resulted in an average of 5% of unfilled positions per month during that period.

“Warehouse and warehousing job demand has already surpassed trucking jobs, and labor shortages are expected to continue to impact warehouse capacity issues through 2022,” WPI said.

Editor✎ Ashley/

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