It’s a trend that small businesses say they are seeing this holiday season: they are carrying far more excess inventory than they had anticipated having by this time of the year. While there is no data yet for small businesses pointing to this larger trend, several designers and shop owners say sales have been slow this year, if not falling. In most cases, small businesses don’t have the same backup savings as big box retailers to hold on to this stock, or to free up the excess by selling at a huge discount.
The troubles designers are facing is partly because the fashion industry headed into the holiday season with far more inventory than it had planned. On average, a fashion retailer carried 58 percent of surplus stock, according to data shared by Inventory Planner, a software company that commissioned a survey on 500 apparel sellers of different sizes in August. It was so much that every retail company in the survey was estimated to have written off one-fifth of their entire inventory as a loss in the last year. For context, Inventory Planner previously estimated that the average small US retailer sits on 22 percent of surplus stock which is worth about $48,000 of surplus stock.
Now these numbers are much higher. $64 billion worth of inventory is currently sitting in clothing and accessories stores, according to preliminary September data from the US Census Data. This was $57.8 billion at the start of the year. For every dollar a US retailer makes, they have $1.35 dollars in stock, said Mark Hook, spokesperson for Inventory Planner. “Every dollar tied up in inventory is a dollar that can’t be invested in growth,” he says in an email.
“For apparel, the excess inventory risks are greater because trends change so often.”
That meant these same retailers kicked off the holiday season offering heavy discounts to spur sales. Consumers spent $12.4 billion on Cyber Monday, 9.6% higher than that of last year, according to Adobe Analytics data, which provides a comprehensive view of the US e-commerce market. Apparel had the highest sales growth, or 189% higher than an average day in October. It also had huge discounts, or up to 23% off listed price, as opposed to 18% last year.
Online spending reflected the “impact that discounts have on consumer demand,” said Vivek Pandya, lead analyst at Adobe Digital Insights, in a statement.
This excess inventory is especially hurting small businesses like Franco’s, which simply could not afford to compete on discounts.
“We’ve been in the business for nine years, and every year we’ve had growth between 20 to 30 percent. This year is the first year we’ve kind of gone [on a] plateau, says Michael Hagen, co- founder of California-based hat fashion label Wyeth. Given market conditions, Hagen said Wyeth targeted a flat performance not only for this year, but even for 2024.
Still, discounts still do not sound attractive. “I prefer not to offer a discount so often because I think it’s not healthy for the profitability of the brand,” he says. “If you get your consumers used to always having to buy something on sale, they’re hesitant to pay full price.”
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