Consumption downturn? Overstock? Experts reveal the true face of the US retail market

Inflation and the news that retail sales in May fell 0.3% from April have sparked discussions about the "downturn" in the U.S. retail industry, but some scholars believe that this statement is somewhat overgeneralized. In order to understand the most realistic status of the U.S. retail market, American Shippers interviewed Jason Miller, associate professor of supply chain management at the Eli Broad School of Business at Michigan State University.

By linking this with container import data, Jason Miller explores in detail the true reality of the sluggish U.S. retail market and retailers' excess inventory.

Retail sales remain well above pre-pandemic levels

Jason Miller said in an interview that the US retail data released in May seemed bad, but if the impact of inflation is excluded, the current sales volume is still 18% higher than in 2019. A better way is to look at specific categories.

Furniture and home furnishings, mostly imported by container, still saw sales increase by 4% in May this year relative to May 2019 and are still growing.

Another category is electronics and appliances, whose sales fell from a high level to the same level as May 2019, with many sales shifting from offline stores to e-commerce sales. Sales of building materials and gardening equipment increased by 11% compared to May 2019, and both are still very strong sales categories.

The above data reflects the strong demand in the home furnishing market. In addition, sales of clothing (15.5%), sporting goods, hobbies, musical instruments and books (30%) are all rising rapidly.

Most of the sales came from e-commerce sales. U.S. e-commerce sales increased by a staggering 60% over 2019, and online sales were well above 2019 levels in all sectors.

The recovery in services spending has not replaced spending on goods

Jason Miller said that in the quarterly conference call in May, ocean carriers said that import cargo volumes remained strong, but the cargo structure was changing. There were fewer bicycles and cargo for working from home, and more cargo for the service industry.

As Americans return to social activities, spending on services is recovering, but spending on goods remains high. Even though life is harder now than it was last year, just because people feel bad about inflation doesn't mean they'll stop spending.

Inventory-to-sales ratio better reflects the actual inventory level

Another hot topic in the US retail market is "overstocking". Many retail giants, such as Wal-Mart and Target, are offering discounts to clear excess inventory. Investors believe this may curb import demand.

Jason Miller said that the current actual inventory is much higher than the pre-epidemic level, but for retail industries other than automobiles, the inventory-to-sales ratio is still lower than the pre-epidemic level. The lower the inventory-to-sales ratio, the greater the sales.

In October last year, the US inventory-to-sales ratio index was 1.05 [the ratio of actual inventory to actual sales], and it rose to 1.15 in April this year. But in April 2019, the index was 1.23, and by April this year, the index had fallen by about 6%.

Jason Miller also said that the inventory-to-sales ratio varies greatly in different categories. For example, the inventory-to-sales ratio of furniture, electronics and appliances, building materials and gardening equipment is the same as in April 2019 before the epidemic.

However, the inventory-to-sales ratio of clothing categories is still declining, down 13% from April 2019. In fact, the real inventory accumulation is other ordinary goods, whose inventory-to-sales ratio is very high, and they are obviously the main part of retailers' current inventory clearance.

However, even companies with excess inventory will still need to import holiday goods in the second half of the year, which cannot be solved by the current excess inventory. Therefore, US imports are expected to remain high in the second half of this year.

Editor✎ Ashley/

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