According to RetailWire’s Tom Ryan, Walmart, Target, Macy’s and Kohl’s are among retailers that recently cancel orders to balance high inventory levels, a repeat of a strategy used early in the pandemic.
Other steps retailers are using to clear inventories, as spending has slowed in some non-discretionary categories, are using markdowns and repackaging products for the following year. The elevated inventory levels also reflect intentional overbuying to mitigate shortages and relaxation of supply chain constraints.
One of the risks of canceling orders is straining or damaging relationships with business partners. After the arrival of the pandemic, many retailers were denounced for not fulfilling their full payment contracts for goods that were in production, as well as for requests for deferrals, discounts or delays in payment. Several issued statements assuring their commitment
The other risk is not having enough inventory to meet demand. Many retailers and brands indicated they missed out on sales opportunities during the 2020 holiday season due to too-low inventories as demand recovered faster than expected.
Second-quarter calls from analysts found retailers aware of potential inventory shortfall risks due to overly aggressive actions.
Christina Hennington, Target’s executive vice president and chief growth officer, said the steps the discount store’s buying team is taking include “rigorously reforecasting expectations for the rest of the year and beyond and determining where to cut receipts and orders.” futures. In some cases, it meant working with vendor partners to reduce our fall receipts in light of our updated expectations. She also meant quickly building compelling promotional plans to drive unit speed for the product we already had, all with a focus on delivering great value and generating excitement for our customers.”
John David Rainey, Walmart’s executive vice president and chief financial officer, said it had liquidated most of its summer inventory, was reducing exposure in electronics, home and sporting goods, and canceled “billions of dollars of orders” for realign inventories. He said: “Our actions in the third quarter will allow us to make significant progress towards streamlining absolute levels and mix, allowing our stores to be well positioned ahead of the holiday season.”
Source: RetailWire
