Not Getting Better: Relentless Retail Inventory Squeeze amid Shortages & Supply Chain Chaos
Holiday selling season is going to be a mess: Look not for what you want but for what the store has.
The holiday selling season is approaching, and a whole litany of weird shortages is ricocheting through the economy. Stuff suddenly gets hung up somewhere, on a ship, or in a port, and then ends up somewhere else, or it’s on backorder for months, as manufacturers are struggling with material shortages and in in Asia with Covid outbreaks that shut down factories for weeks at a time.
And stimulus-fueled demand in the US has been huge and relentless, while retailers are struggling with inventories, some more than others.
Catastrophic shortages at auto dealers got even worse.
Auto dealers, particularly new-vehicle dealers, are experiencing catastrophic shortages of popular models, as automakers have been getting blasted by semiconductor shortages that simply refuse to abate, leading to rotating shutdowns of assembly plants globally.
Auto dealers are the largest retailer segment, with their sales normally accounting for over 20% of total retail sales, and with their inventories normally accounting for 33% of total retail inventories.
Inventories at auto dealers, measured in dollars, declined to a new multi-year low of $151 billion in August, according to data released by the Commerce Department on Friday.
The long-term dollar-increase in inventory levels that you can see in the chart above is a reflection of higher costs per vehicle in inventory. But the number of vehicles in inventory has been in the same range for two decades, as unit sales have mostly been below the peak achieved in the year 2000.
It’s even worse during the current shortages: Inventory in dollars – though it collapsed – is being inflated by the shift to high-end models as automakers are prioritizing the biggest money makers.
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