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Many retailers are stuck with excess stock. How can they get markdowns right?

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Why markdowns matter

In the news

•

Deep discounts. US retailers’ shops are so crowded with excess inventory that they’re asking suppliers to stop delivering even the goods that are popular with consumers. In July through September 2022, 20 of the biggest US apparel companies carried an average of $2.1 billion worth in inventory, a 26% increase from 2019. Last year, supply chain bottlenecks kept holiday merchandise from reaching stores until early 2022, leading to stockpiles of unsold products. As stores resort to deep discounts to offload goods, consumers can expect blockbuster deals. [Bloomberg]

•

US retail spending slows. US retail spending flagged in November as consumers reined in purchases of autos and holiday items. Retail sales dropped 0.6% in November from October, the largest decline this year. Consumers are spending more on food and other essentials, which leaves less money for holiday shopping, observed one retail analyst. Even with Thanksgiving, Black Friday, and Cyber Monday sales, spending on clothes, electronics, and sporting goods fell. Still, consumers spent more on dining out, suggesting healthy demand for services. [WSJ]

Consumers are going on the defensive financially—they have twice as much in cash savings (or
$3.7 trillion more) than they had in the fourth quarter of 2019.

On McKinsey.com

•

Sitting on excess stock. US consumers have kept retailers on their toes lately. Consumer spending recovered relatively quickly after the onset of the COVID-19 pandemic in early 2020. By 2021, consumer demand exceeded retailers’ stock levels. Since then, high inflation and fears of an economic recession have made consumers more cautious about spending, resulting in the opposite situation: more stock than demand. For many retailers entering this holiday season with high inventory levels and declining profitability, getting markdowns right will be critical, say McKinsey senior partner Becca Coggins and colleagues.

•

Slumping demand. With consumer demand slumping throughout 2022, items that were once hot commodities—such as coffee makers, exercise bikes, and loungewear—have been piling up in stores. But a host of other challenges, including ongoing supply chain problems and labor shortages, is also muddying the outlook for 2023. Retailers must become more responsive to stay ahead in a volatile world. By treating markdowns as an afterthought, many are leaving money on the table. Consider four questions that can help retailers get markdowns right.

Learn more about markdowns

— Edited by Belinda Yu, Editor, Atlanta

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:43 - 22 Dec 2022

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Many retailers are stuck with excess stock. How can they get markdowns right?

Why markdowns matter

In the news

Consumers are going on the defensive financially—they have twice as much in cash savings (or
$3.7 trillion more) than they had in the fourth quarter of 2019.

On McKinsey.com

Archives

in

info@learn.odoo.com

Temperature Monitoring - White Label GPS Tracking Software

Have you read our top stories on diversity, equity, and inclusion?

Many retailers are stuck with excess stock. How can they get markdowns right?

Why markdowns matter

In the news

Consumers are going on the defensive financially—they have twice as much in cash savings (or $3.7 trillion more) than they had in the fourth quarter of 2019.﻿

On McKinsey.com

Consumers are going on the defensive financially—they have twice as much in cash savings (or
$3.7 trillion more) than they had in the fourth quarter of 2019.