Retailers in the US are clearing out excess inventory as they reopen stores post COVID-19 lockdown, indicates research firm Coresight Research.
Temporary store closures across the US began in the second half of March, owing to the COVID-19 pandemic. It was possibly the worst possible time, as it was at the end of the spring apparel season before the start of the summer season. Spring collections were, thus, largely trapped inside closed stores, and summer collections, those that could not be cancelled, were trapped on ships and inside warehouses.
As stores begin to reopen with the easing of lockdown, retailers are faced with a tough choice regarding their excess spring-collection inventory. If they have sufficient liquidity and wish to protect their brand, they can pack it away for next year or donate it. If not, they can try to roll over the spring merchandise as the summer collection or find a channel in which to sell it – such as an outlet, an off-price store, a liquidator or the resale channel.
Hence, a large quantity of merchandise is likely to hit the US market this summer from regular stores, especially from retailers that are permanently closing stores and those that are liquidating following a bankruptcy filing. Discount and off-price stores were temporarily closed amid the retail lockdown and so were not immediately available as a channel for offloading merchandise. With more retailer bankruptcies and store closures likely to come, this could lead to additional discount sales and liquidations.
Many retailers – such as Gap, J.Crew and Nordstrom offered discounts of 40-70% in late April – chose to discount their merchandise steeply to clear inventory. They are also keen to position themselves to catch the remainder of the summer and the back-to-school seasons, and move towards preparing for the holidays. Even Amazon has pushed its Amazon Prime Day to September, which is normally scheduled for mid-July, as it had to reconfigure its supply chains during the COVID-19 outbreak to focus on household staples and medical supplies. Such shopping festivals could have the potential to reignite excitement among US consumers.
Even as consumers have become accustomed to continuous discounting from some retailers, it is possible that this spate of unseasonal deals will lure them back into stores again, Coresight Research concludes.