Shop Closures, Slow Shipping Could Drive Retail Prices Lower


The coronavirus pandemic could result in substantially lower retail prices for some groups, as shop closures and merchandise returns due to slow delivery result in an inventory glut. The issue may be broken into two broad categories: excessive discounted inventory […]

The coronavirus pandemic could result in substantially lower retail prices for some groups, as shop closures and merchandise returns due to slow delivery result in an inventory glut.

The issue may be broken into two broad categories: excessive discounted inventory and slow-shipping-induced returns.

Discounted Inventory

Some retail businesses could face a substantial increase in discounted inventory as a result of retail bankruptcies, shop closures, and stalled supply chains.

All these problems may cause an oversupply of marked-down products within the next several months.

Retail bankruptcies. The coronavirus sped the demise of many, already fighting, brick-and-mortar retail chains. A number of these firms had planned to shutter stores or even cease operations.

By way of instance, Modell’s Sporting Goods Inc. stated in March 2020 it would shutter all its remaining 141 shops after bankruptcy proceedings, only to have its going-out-of-business sale disrupted by nationwide shelter-in-place and stay-at-home orders. As companies reopen, Modell’s is expected to keep on liquidating its inventory.

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The Covid-19 pandemic also contributed to Pier 1 Imports Inc. filing for bankruptcy and declare that it would shutter all shops and cease operations.

“We’re grateful to our dedicated and hardworking associates, millions of consumers, and dedicated vendors who have jointly supported Pier 1 for decades,” said Pier 1 CEO Robert Riesbeck in an official announcement.

“We deeply value our partners, customers, business partners, as well as the communities where we operate, and this isn’t the outcome we expected or hoped to attain. …Unfortunately, the retail environment has been significantly compounded by the deep effect of Covid-19…requiring us to wind down.”

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To these bankruptcies, include J.C. Penny Co., Neiman Marcus Group Inc., J.Crew Group Inc., Tuesday Morning Corp., Art Van Furniture Inc., Stage Stores Inc., and many more. And it does not include the hundreds or even thousands of single-store retailers that the pandemic has pushed out of business.

What all of those bankrupt companies have in common is stock that should be liquidated.

Bankrupt retail stores will have to liquidate inventory at discounted prices. Photo: Artem Beliaikin.

Sometimes, these retailers will sell stock at discounted prices from their shops. Others might sell considerable quantities of stock to overstock or discount chains. Still others may auction pallets of products that will make their way to eBay, Amazon, and other online marketplaces.

In all cases, shoppers must expect to find heavily-discounted things for the next several months.

If your ecommerce or omnichannel retail company is healthy and functioning in the same industry segment among those struggling or defunct merchants, there may be downward price pressure on a few of the products your company sells.

Store closures. Bankruptcies aren’t the only potential retail stock issue.

When the stores and boutiques at The Village in Meridian shopping centre in Meridian, Idaho closed in late March, as an instance, those shops tended to have 2 sorts of seasonal products on display.

There were the remaining Valentine‘s things, which were on sale at closeout prices. Secondly, there were the many and various Easter-themed products prepared for the April 12 holiday. By the time those shops reopened in May, the two seasons had passed.

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Now, a lot of these items are heavily discounted.

The illustration can extend to almost every seasonal retail thing in the country. As shops reopen, they will have to market through now-out-of-date products.

Therefore, this second source of discounted inventory has the potential to reduce demand for comparable, full-price items, at least in the long run.

Supply chain in waiting. The pandemic’s shutdowns not just influenced retail shops but also caused closures and worker furloughs in retail warehouses. Sometimes, those warehouses had assembled pallets of goods to get a chain’s locations. Those pallets, wrapped in plastic, are still sitting on docks waiting to be loaded on a truck and delivered to a brick-and-mortar shop.

Some of those pallets contain the very same sorts of Easter or spring things that recently reopened stores want to sell at deeply discounted prices.

Thus, supply chain disruptions are another source of discounted inventory which could push retail prices lower in certain industry sectors.

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Slow Shipping

The surge in retail ecommerce sales — most notably Amazon and Walmart — combined with closures in March, April, and May, has strained ecommerce transport.

Sometimes, the carrier, like the U.S. Postal Service, has been not able to keep up. In other cases, businesses that furloughed most of their warehouse employees have been slow to ship.

Regardless, slower delivery times have supported a new type of customer behaviour that may impact omnichannel retailers.

Here’s an example. Imagine it’s early May. Nearly all physical shops are closed due to the pandemic. A kitchen-supply retailer, possibly in need of cash flow, has set an espresso machine which normally sells for $700 available for $500. A shopper buys it.

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Fast forward to the end of May. This exact same kitchen-supply merchant has just reopened its physical stores, but it hasn’t yet been able to satisfy the numerous orders it received throughout the espresso machine purchase.

A shopper, flush with money from a stimulation check, goes to the physical shop and buys the identical espresso machine another time as opposed to continuing to await the online order. After the online order does arrive a few days later, the consumer takes it into the physical store and returns it unopened.

This may seem crazy, but it’s happening. What is more, the returned item is currently sitting in the shop’s backroom for up to 15 days, based on the series’s procedures.

Downward Price Stress

Together, store closures and yields due to slow shipping could create an inventory glut in some retail segments, pushing down prices.

Retailers may want to check at their stock positions and determined if it is sensible to reduce reorders or, possibly, even attempt to purchase stock from a new broke competitor.

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