Retailers Are Sitting on Excess Inventory as Demand for Athleticwear Drops

For the past two years of the pandemic, consumers have been stuck at home without many options for recreational activities. The demand for athleisurewear and home goods skyrocketed during that time, and retailers like Macy’s, Gap, and Walmart benefited from this increased spending.

But now, consumer spending is starting to shift, thanks to inflation and increased travel. Customers aren’t as interested in spending their money on athleticwear or home goods anymore, leaving retailers stuck with the excess inventory.

Consumer Demands Are Shifting

Clothing stores like Macy’s, Gap, and Lululemon made out pretty well during the pandemic. Even though these stores were forced to close temporarily, many saw their sales increase.

Consumers were spending more time at home, travel and dining out were restricted, and many saw their savings increase thanks to stimulus checks. During this time, the demand for athleticwear and home goods steadily rose.

But now, the demand is shifting faster than many retailers anticipated. As inflation continues to rise, customers are spending more money on necessities like food and gas, and any leftover disposable income is going toward things like travel and eating out. 

According to Citi analyst Paul Lejuez, retailers underestimated how quickly this shift would take place. This sudden change left stores with excess inventory that will need to be marked down and could weigh on future profits.

Walmart’s inventory increased by 33% during the first quarter, and 20% of the increase are items the company doesn’t really need. The company will have to discount most of this inventory, which will affect profits during the coming year.

Stores like Gap and Kohl’s are in similar situations — Gap’s inventory is up 34% from last year, and Kohl’s has 40% more inventory than last year.

How to Keep Up With Customer Demand

Some elements of this situation are unique because of the pandemic and record inflation, but many business leaders have found themselves in a situation where they thought they knew what their customers wanted, only to see that demand suddenly shift.

Here are some tips for how you can stay on top of customer demand in your own business:

• Talk to your customers: It’s impossible to know what your customers need if you don’t ask them. Take the time to survey your customers and find out why they chose your business over a competitor. What are their main points, and how do they make buying decisions? Asking these questions will help you start to develop solutions to meet future needs.
• Track your metrics: Another good way to understand your customers is by analyzing your data. Are there any products and services that seem to be selling especially well, while the demand seems to be waning in other areas?

Always be ready to pivot: And finally, it’s only a matter of when — not if — demand will change, so you’ll need to be ready to shift your strategy. Always be looking for new solutions and be willing to try something new if you want to stay ahead of your competition.