A surplus of consumer goods at retail stores throughout the U.S. means holiday shoppers might find some of the best deals now. Virginia Tech analyst Jadrian Wooten says this is the product of an interesting economics puzzle, albeit one that makes some sense in the broad scheme of things.
As Wooten explains: “We’re seeing essentially two different things happening. Some of the holiday deals are related to the inventory issues and others are more about being a ‘first mover’ on holiday specials.”
A surplus inventory is inventory that a company holds in excess of the amount that they deem necessary to have within a specific time period. Initially it seem good to be having more than you need. However, this leads to cash-flow problems and storage issues, and many companies seek to off-load slow moving or excessive quantities of stock.
Wooten adds that the increase in online shopping during the pandemic remained strong coming out of the pandemic as incomes were rising. Companies responded by ordering more products from their suppliers and were stocking up for continued strong spending.
“Inflationary pressures have slowed down that spending and now retailers are left with a lot of stuff that they need to sell,” says Wooten. “We’re now seeing some good deals marketed as holiday deals, but the items are things you could have bought at any point in the year.”
Inflationary pressures are the underlying causes of inflation. Such pressures are the reason that the production of goods increases to meet or exceed consumer demand or that prices increase due to lack of supply.
On the flipside, Wooten says that consumers will also see more holiday-specific products which would not necessarily be as impacted by storage issues.
Wooten continues: “Things like holiday cards or items with holiday-specific packaging would have been ordered specifically in anticipation for the holiday season. These are the sorts of items you’re seeing out on shelves now as firms try to get a head start on their competitors. The ‘Christmas Creep’ is generally restricted to those more obvious holiday items, but general holiday sales tend to get lumped in there as well.”
In terms of impacting the holiday shopping season, Wooten says that it will likely be more similar to what was seen in 2020 when companies were moving a lot of deals online and earlier to avoid having people coming into stores.
He clarifies: “These early deals aren’t necessarily increasing overall spending but rather shifting when the purchases occur. It’ll provide some smoother sales numbers for the firm and likely help reduce the need to hire a lot of temporary workers in December.”