High Inventory Levels May Actually Be a Good Thing

Embracing Inventory

Historically, having an abundance of products has been a cause for panic among retailers. That’s because full shelves usually indicate products aren’t selling. Inventory levels that are too high can often force retailers to discount goods, cancel orders, and scramble to move product by any means necessary.

Now, after two years of supply chain issues and product shortages, companies are actually embracing fully-stocked shelves — as long as the goods are still in demand. Amid record-high inflation, demand has been a legitimate question, even during the holiday season. But the results are in and, for retailers, they sound promising.

Companies like Dick’s Sporting Goods (DKS), Lowe’s (LOW), and Walmart (WMT) say their excess inventory leaves them in a great position to take advantage of the holiday shopping rush.

Black Friday’s Success

Black Friday, one of the busiest shopping days of the year, is always a big test for retailers. This was especially true this year, with consumer spending power limited and recessionary fears heightened. If consumers decided to stay home, retailers would be stuck with too much inventory in-house, which would be the worst case scenario for those businesses.

But many retailers reportedly had no problems with shortages during Black Friday, according to a survey of 13 shopping centers conducted by the commercial real estate firm CBRE (CBRE). Retailers were adequately prepared to meet shoppers’ demand.

A Balancing Act

There’s another side to this story which shows the American consumer is still spending freely — a good sign, considering the tough macroeconomic climate.

With inventory stockpiles now well above pre-pandemic levels, consumers have to spend at a higher-than-average rate to keep up. However, based on the feedback so far, it appears as though consumer demand is matching these elevated inventory levels.

Although Black Friday is just the beginning of the holiday rush, it’s shaping up to be a season of celebration already – for both retailers and consumers.

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