When Brands Stock Up, Marketing Pressure Builds Up,Too

The supply chain issues of the past two years had marketers scrambling as companies struggled to capture demand and fill orders in time. Shipping woes and shortages exposed smaller D2Cs on borrowed supply chains as well as huge companies deploying “just in time” ordering and inventory management. Wait times, out-of-stock notifications and delivery are an important part of the customer experience and affect key marketing goals. To avoid creating angry customers, many marketers had to change what they were promoting -- or stop promoting everything, if the supply chain was too sluggish.

Business models changed for advertisers big and small. Many slimmed down product lines or diversified their supply chain.  Now, despite supply chain pressure easing, many companies are stocking up.  The inventory to sale ratio (as measured by Census) is rising for the second straight month, with inventories themselves up 14% in May year over year.

Stocking the shelves for holiday

Almost half of all toy sales happen for the year in Q4. For example, Hasbro announced it is stocking up now to make sure every kid who wants a My Little Pony this holiday gets one. Per the Wall Street Journal, Hasbro is holding 75% more inventory from a year earlier, representing the highest quarterly inventory level it’s held in about 30 years.

But will parents clear those shelves this holiday?  A recent survey from Deloitte says 54% of parents of school-age children believe the economy will get worse in the next six months. However, that very same survey has them intent on splurging for back-to-school spending.

Any market researcher knows that what consumers say and then actually do can be two very different things. And consumer sentiment and spend -- metrics that have moved together for decades -- continue to decouple.

Forecast demand correctly (or deal with a full warehouse)

Big retailers such as Walmart and Target reported inventory overages that ate into profits in Q2. Target warned investors in early June that it would mark down unwanted items and try to reduce inventory.  Big box, home goods and apparel brands stocked up a bit too much on products that were more popular during the pandemic, and needed to get rid of excess inventory. 

Forecasting is always one of the hardest things for marketers to get right. The past few years, even the most sophisticated marketing organizations have been wrong more than right. Consumers’ hatred of inflation and changed preferences from post-pandemic habits are messing up models all over the place. Consumer demand for goods and services is still changing, but very negative economic sentiment because of inflation adds a fog that makes the future even harder to see.  Marketers have to follow trends on tighter and tighter timescales to try to adapt.

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