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Retailers Look To Cancel Supplier Orders As Market Changes

Suppliers are facing a new problem, retailers who want to cancel orders.

As the Reserve Bank lifts interest rates and consumer confidence in Australia slips 4.1% last month retailers who were scrambling for stock earlier in the year, are according to suppliers moving to cut back or even “cancel” orders that were scheduled for the second half of the year as they become concerned about the economy and the impact of inflation.

The problem is not isolated to Australia.

Target in the USA whose brand name is owned by Wesfarmers last night warned its profit would drop because it needs to cancel orders with vendors and offer discounts to clear out unwanted goods.

With some Australian retailers the issue is more about having the right stock with “value” and “affordable” premium products now in demand over premium according to a NSW based Harvey Norman store manager.

Retailers who benefited over the past two years from the pandemic rush to buy furniture, consumer electronics and home décor, as shoppers were buoyed by savings and government stimulus payouts are now struggling to get their mix of stock right with several who rushed to place orders with suppliers now struggling with price rises and stock they are “struggling to “shift” said one insider.

Several suppliers who have been hit by price rises are also struggling to pass on cost increases for goods that have been impacted by inflation increases.

RETAIL FITOUT

Order books for many retailers are developed nearly a year in advance, resulting in them having to project sales for goods without the knowledge of what is happening to the Australian economy said a Citi analyst.

“Now they are adjusting to real time stock control”.

Several major US retailers have said that they are facing the same problem as Target and that inventory levels are “too high” they include Walmart, Macy’s and Best Buy.

Some who have good cash flow are holding on to some items to sell at the seasonally appropriate time when they can maximise returns.

In Australia both Woolworths and Coles are in battles with suppliers over stock control and rising prices.

Walmart the world’s biggest retailer recently posted a lower-than-expected profit when it reported earnings last month, in part because of labor costs that were higher than it anticipated and spending shifts.

They also reported inventory was up 33% in the most recent quarter and that they are now moving to offload that stock.

They blamed the higher costs of goods because of inflation and a sudden uptick in goods arriving from Asia.

Several big retail groups are moving to big data to give them better insights into stock control and consumer buying.

Kmart Group intends to avail itself of the digital capabilities being developed by parent Wesfarmers’ centralised data and digital division, OneDigital.

The retailer’s managing director Ian Bailey told analysts during a Wesfarmers strategy briefing day that it will “collaborate on shared initiatives where it makes sense”.

“We will increasingly be leveraging OneDigital capabilities to enhance our customer insights, access new channels to market and accelerate new capabilities such as centralised online fulfillment,” Bailey said.

Wesfarmers are hoping that their investment in new digital capabilities also delivers better intelligence for buyers.

It established ‘OneDigital’ in the second half of FY22 and extended the benefits of the OnePass membership program to Kmart and Target.

It has strengthened its e-commerce capabilities, while Bunnings and Officeworks are also looking at new ways to control stock and better engage with consumers.

Wesfarmers said that it’s developing platforms for long-term growth.



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