U.S. retailers are reducing overinflated inventories. Instead of rushing to replenish inventory, these retailers are focusing on having the right amount of inventory. The strategy upends the assumption that inventory reductions will automatically lead to more restocking and freight traffic, reversing a downward cycle that has been firmly in place since last fall. "
Lower-than-expected retail inventory reductions, combined with more precise forecasting, ordering and restocking, mean container imports as well as domestic intermodal and trucking volumes are down, meaning the depressed freight market is unlikely to return to its former glory any time soon.
Kenneth Bull, chief operating officer of discount retailer Five Below, said its total inventory reached $0.544 billion at the end of the second quarter, and Five Below's inventory was 4.4 percent lower than a year earlier. However, on a per-store basis, average merchandise inventory has fallen by 15% year-on-year. In order to buy better at the end of the day, we must ensure that we have the right inventory in the right place at the right time.
Fabric and crafts retailer JOANN's executive vice president Chris DiTullio Chris DiTullio said that in order to make room for more Halloween products in the pre-Halloween months, this year JOANN reduced its spring and summer inventory.
Retail inventory reduction is lower than expected, coupled with more accurate forecasting, ordering and replenishment, which means that container imports and domestic multimodal and truck transportation volume are reduced. Due to inventory revenue optimization and import freight excess cost reduction, JOANN CFO Scott Sekella said that our inventory at the end of the second quarter compared with the same period last year decreased by 14.4, and customs clearance items accounted for less than 6% of the total.
Freight demand slows
According to an analysis of U.S. inventory data by Jason Miller, associate professor of logistics at Michigan State University, weak U.S. imports will continue until mid -2024. Trucking volumes are expected to remain weak through the first half of 2024, meaning the depressed freight market is unlikely to return to its former glory any time soon. "
From June to August, LTL carriers' freight volume increased by mid-single-digit to double-digit percentages, but this was from the former U.S. third-largest LTL carrier Yellow redistributed cargo, not new cargo or demand.
Retailers are using technology and data analytics to more closely "read" consumers and adjust their sales and inventory levels, anticipating the year-end market to rebalance.
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