The US retail industry is caught in an "inventory crisis". Who is the driving force behind it?

U.S. retailers are facing the worst inventory crisis since the dot-com bubble burst. As the cost of food, gasoline and other goods continues to rise, consumers have begun to pull back on discretionary retail spending. Many retailers must now focus on reducing excess inventory levels and finding new ways to meet changing consumer demands for when, how and what they buy.

NPD's latest research shows that there are four main forces that have created the current situation of the US retail industry.

1. Seasonal consumption changes

How and when American consumers buy the items they want and need has been changing for years, and that change has accelerated during the pandemic.

According to traditional retail rhythms, new spring merchandise usually hits shelves in the winter. However, as shopping for what you need now has become more popular, consumers have been forced to start buying what they want online. This makes it more difficult to plan inventory, as retailers are forced to stock the products consumers want for a longer period of time.

2. Holiday shopping peak is flattening

While the Easter retail season in the U.S. wasn’t bad this year, sales for Mother’s Day, Memorial Day and Father’s Day were smaller not only compared to last year, but also compared to pre-pandemic 2019. This holiday sales slump has raised concerns that consumers are not just cutting back on holiday gift spending, they may be fundamentally changing the way they shop.

In a sign of change, the expected flatter holiday season this year compared to the more stable trends of past years, retailers and manufacturers should prepare for larger competitive promotions to create more excitement during peak shopping periods, including the upcoming back-to-school season.

3. Consumption is decreasing

The data suggests that there has been a shift in consumer spending. Consumers are largely willing to pay higher prices. However, with savings dwindling and inflation climbing, consumers are no longer willing to trade up or pay more.

With rising interest rates, increasing consumer debt, and rising prices, consumers' focus has begun to shift from shopping to saving.

4. Product upgrade cycles are changing

The pandemic has rapidly changed the upgrade cycle for many products. Take TVs, for example. Consumers might upgrade every seven years. In the early days of the pandemic, when entertainment options were limited to the next streaming series drop, many people bought new and better TVs. If retailers and brands want to change this trend and shift upgrades, they must give consumers good reasons.

The pandemic has led to some abrupt changes in consumer behavior, with many consumers buying technology products outside the boundaries of typical upgrade cycles, such as upgrading their TVs early or investing in home office equipment. These purchases have boosted demand for years to come.

Now, the electronics and tech market is transitioning to a more normal, if slightly stretched, upgrade cycle. Over the past two years, the normal seasonal shopping period for tech products has been altered as consumers buy products when they need them, rather than waiting for sales to happen.

Editor✎ Ashley/

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