Big CE Retailers Spending Millions Buying Up Stock Small Retailers Struggle
Consumer electronic and small appliance retailers in Australia are spending millions building stockpiles of inventory in anticipation of a surge in spending by consumers when lockdowns are lifted in Victoria and New South Wales.
The move is seen as a strong show of confidence in consumer demand, even though there is uncertainty as to whether consumers will actually flock to stores when retail bans are lifted.
While there is over $200 billion in savings sitting in consumer accounts some retailers have told ChannelNews that they are concerned that a lot of small retailers, as well as those that work in the travel industry will not have the money to go on a spending spree
Big W, Target, Harvey Norman and JB Hi Fi and other large retailers such as Myer are amassing more inventory compared with last year’s pandemic-depressed levels, in some cases logging double-digit percentage increases as the stockpiles also exceed 2019 values according to sources.
ChannelNews understands that Harvey Norman deliberately held back how much they would pay out in dividends so that they could invest in inventory stockpiles.
The situation is not unique to Australia with distributors and suppliers having to compete with US retailers for supplies.
According to European sources consumers did not flock back to stores in the EU like they did in the USA putting pressure on European suppliers.
Covid-related factory shutdowns in Asia and global shipping bottlenecks have businesses now jockeying for merchandise and vessel space, to avoid losing critical fourth-quarter sales.
A divide is also developing with big retail chains being given priority by brands because of their “buying power” according to local sources.
An executive from one major brand said, “We only have limited supply, so we are favouring our biggest customers”.
We understand that both JB HI Fi and Harvey Norman are battling for supply with both these big CE retail groups seen as “favourites” for several suppliers.
Smaller competitors are often seen as being at a disadvantage when negotiating with suppliers or competing for space on container ships as rates surge on tight shipping capacity claim observers.
If a small business that needed to ship a few sea containers goes up against a big retailer looking to move significantly more product, for instance, the larger order would win, said Joseph Feldman, a senior managing director at Telsey Advisory Group who focuses on retail. Smaller operators, he said, “don’t have the scale.”
Big bets on inventory could backfire if merchants end up with a glut of unsold goods.
Analysts say that risk is small, because even if pandemic shutdowns resume, consumers will likely shift back to buying goods instead of dining out or traveling.
“I think the bigger risk is not having enough inventory versus having too much,” said Rod Sides, who leads Deloitte LLP’s U.S. retail and distribution practice. “We’re projecting a much, much bigger holiday season.” claims Feldman.
The same situation is happening in the USA
Global inventories at Walmart for example, rebounded this summer after dropping in the same period of 2020 compared with pre-pandemic levels, as the company stepped up efforts to meet strong consumer demand, including chartering vessels to bypass ocean shipping bottlenecks.
“In 2020, at the end of the second quarter, we were way too light in stores and on the e-commerce side,” Walmart Chief Executive Doug McMillon said at a Sept. 9 investor conference. “So, we would take even more inventory if we could get it.”
Walmart’s consolidated inventories reached nearly $47.8 billion in the quarter ended July 31, a 16% increase from the year-ago period and up 8% from the same quarter in 2019. Walmart U.S. inventories were down 4.6% between the fiscal second quarter of 2021 and that of 2020, a spokesman said.
The Wall Street Journal reported that the effort to push more goods to stores and warehouses follows a drop in inventories over the past year after retailers pulled back orders in 2020 in the early months of the pandemic and then faced big supply-chain backups as they sought to restock this year.
In the USA Target’s inventory rose to almost $11.3 billion in value in the most recent quarter, up more than 26% from the same period in 2020, putting the retailer in a better position and providing it more confidence going into the holidays than last year, the company said.