NSGA Sept/Oct
Good News Bad News
First the good news… at least as I write this business has bounced back nicely for most especially in categories where sufficient product is available. We saw many cases where July sales actually exceeded 2019 levels. Couple the sales increases with lower inventory levels and the result is faster turn and better cash flow.
Now for the bad news… the aftermath of Covid-19 has created many challenges for the sporting goods industry and retail in general to deal with in the coming months. In no particular order trouble spots include finding good help (or in some cases finding ANY help) rising prices due to inflation stock shortages supply chain interruptions and rises in Covid cases in some areas of the country.
When it comes to finding good people much has been extensively covered on this topic by Management One the merchandise planning company that I am affiliated with. In the interest of brevity and avoiding duplication I will attach a link to an interview that Management One CEO Marc Weiss had with Kim Pagano of Publik …. Not only will you find worthwhile ideas from this interview but you will be able to gain access to the webinar entitled Talent Acquisition: Finding and Attracting the Right Talent for your Retail Business.
Certainly this fall and perhaps well into 2022 and beyond the retail landscape will endure its share of stock outs and supply chain interruptions.
Whether caused by lower productivity at US ports back-ups at ports in China driver shortages here in the US factory shutdowns union issues or lack of anticipation of retail demand at the wholesale level the result is the same: anemic assortments or empty shelves for products your customers want to buy.
According to a well-respected equipment leasing consultant that I have known for several years the entire supply dilemma is analogous to a wave starting small at the beginning and getting bigger and bigger until it finally crashes into shore. According to this source these supply chain disruptions will most likely not smooth out until Q1 or Q2 of 2022 at the earliest.
Current Industry Impact
Currently the bike industry as one example is experiencing over a twelve months lag time from order to delivery. Some vendors I am told are even putting retailer purchases on allocation.
I actually work with a relatively large bike retailer that due to high demand and lack of product from key vendors is turning the car rack category 5.5 times. We’re not talking women’s dresses here folks where I would expect fast inventory turnover; these are bike racks.
Current on-order is now 3 months past due and retail prices that were $669 for a system are now going to set customers back $889 an increase of nearly 33%. This is due to not only supply and demand but also inflation.
Positive Outcomes from Supply Chain Interruptions
Supply chain interruptions have forced many retailers including the one mentioned above to develop relationships with alternative vendors. This has proven to be a win-win-win for vendor retailer and consumer. The vendor gets a chance to perform at a store that has never carried their products before. The retailer gets to keep his inventory plan intact albeit with an alternate assortment plan and the consumer gets the products they want.
New Valued Business Partners
What many retailers are discovering through all of this is vendors that in the past may not have been the first choice are becoming valued business partners.
Challenges in Merchandise Planning
All of these issues make merchandise planning at the retail level much more challenging to say the least. Business is good—very good in many cases due to the economic rebound. An even better scenario would be if stores could schedule needed deliveries without having to book futures out a year in advance or overbuy in hopes of getting half of what they originally ordered.
Many retailers are rolling the dice by deciding what categories to gamble on (athletic shoes) by committing to future buys that are in excess of what they would normally place as the concern is that reorders and fill-in orders might well be non-existent.
Projecting Inventory Needs During Uncertainty
With business rebounding to 2019 levels and above and supply issues impacting many products and entire categories the question becomes how best to project inventory needs during this period of uncertainty? Hopefully you have a merchandise plan in place that incorporates sales trending to some degree. That will help you project short-term (Q4 of 2019 through Q2 of 2022) inventory requirements.
One client I spoke with recently had just returned from market where she was counseled that if cash and space were available (both are) she would be well served to land ALL of her Holiday goods now to make sure that she would get everything needed. Given the uncertainty of availability closer to need I think that was good advice this year.
Current Business Trends
I am seeing many cases where business is currently up fifty+ percent over 2019 levels. Stores are selling everything they can get their hands on in many cases creating faster inventory turnover and solid cash flow.
Future Concerns
My concern moving forward is that when supply chain issues level out—which they will—and sales levels normalize—which they will—is that if stock-to-sales ratios are not closely monitored by store and classification the pendulum is likely to swing too far in the opposite direction causing the undisciplined retailer to end up in an overstocked situation. That would be unfortunate but is also easily preventable with accurate merchandise planning in place.
Ritchie Sayner
Summary
The sporting goods industry is experiencing a rebound in sales surpassing 2019 levels but faces significant challenges due to the aftermath of COVID-19 including labor shortages rising prices and supply chain disruptions. Retailers are adapting by forming new partnerships with alternative vendors which has been beneficial for all parties involved. However the uncertainty in supply chain stability necessitates careful merchandise planning to prevent future overstock situations.
“Supply chain disruptions will most likely not smooth out until Q1 or Q2 of 2022 at the earliest.”
Real-World Examples of Challenges and Adaptations in Retail
The article highlights significant challenges faced by the retail industry post-Covid-19 particularly focusing on supply chain disruptions and talent acquisition. Here are a few real-world examples that illustrate these challenges and how businesses are adapting:
- A major electronics retailer struggled with stock shortages due to supply chain delays. To mitigate this they diversified their supplier base sourcing components from multiple countries to ensure a more stable supply of products thereby reducing dependency on any single region.
- A well-known apparel brand faced difficulties in hiring skilled staff prompting them to invest in an extensive online training program. This initiative not only attracted new talent by offering skill development but also improved employee retention by enhancing their career growth opportunities.
- A large home goods retailer experiencing increased demand yet facing product shortages collaborated with smaller local manufacturers. This partnership not only helped maintain inventory levels but also supported local businesses creating a positive community impact.
