Marketing in the News
The article "Too Much of a Goods Thing: Retailers Are Drowning in Inventory" first caught my attention by the photo associated with it, one of my favorite places to shop, Target. Because Target is one of my favorite stores, I was interested in reading this article and learning more about what the title was referring to.
This article shares that Target is one of the many stores that have bought too much and has to take "aggressive measures" to get their inventory levels under control - these drastic measures include cancelling orders and marking down items. Along with high inventory levels, Target's stock was hit a few weeks ago, and recently went down again. Target isn't alone - many other retail stores have had the same issues of buying too much of the wrong thing. The article notes that although supply chain issues are a contributing factor in the "mismatch between supply and demand", the retailers should have better predicted the shifts in consumer behavior - since Covid is a bit more under control, consumers are spending more on services and entertainment (travel, shows, dinner). Retailers should have also been paying attention to what consumers are buying - the apparel department is their major focus as "occasion-based" buying is coming back. Another point the article shares is that although there is low unemployment and growing wages, inflation pressure is starting to effect consumer purchasing and how consumer spending is prioritized. One of the drastic measures Target has to take is marking down items, which is already taking place according to the author of the article - they decided to conduct informal store checks and found an "unusually high level" of markdowns. The markdowns are also predicted to continue and "widen" in the coming weeks. We should not be surprised by consumer spending patterns changing, but Target, being such a big company, getting this wrong is shocking. Companies such as Walmart and Target are predicted to bounce back by the holiday season, but for companies such as Macy's, Kohl's, and Gap, this was possibly the worst time for something like this to happen.
The Value Proposition of Target is, "Expect More, Pay Less". This company is a "go-to" for many people, and many different reasons - casual shopping, special occasions, gifts for others, home décor, and more. Target has a vast amount of inventory and there's something for everyone, their prices are reasonable and affordable, and the quality isn't bad. The line "Expect More, Pay Less" holds true - you get more products to choose from, and you pay less.
The relevance of this article to marketing is related to crisis management - the company bought too much and they have to take "aggressive measures" to get their inventory levels under control. Their "aggressive measures" include cancelling orders and marking down items. Target bought too much of the wrong thing, this results in cancelled orders - they don't have enough of what the customer purchased to fulfil the orders. The other measure is markdowns, they are trying to get the excess inventory off their shelves by having a "massive sale". The problem of having too much of the wrong thing is Target's challenge, fortunately they aren't "falling behind" when compared to a competitor such as Walmart - their inventory grew 33% and sales only went up 3%.
This marketing approach is good - it's the most reasonable solution to the problem they have with excess inventory. Target's stock took a bit hit, but with marking down items and selling the excess inventory they should recover in a relatively short period of time. With this marketing approach investors should be satisfied when profit is recovered, and customers are satisfied with sales - who doesn't like sales? If I was part of management I would have done the same thing. This is a solution that makes the most sense for everyone - Target marking down excess inventory gets the inventory off their shelves, sales items are a win for consumers, and profits/stock are recovered in a short period of time.
From this article I learned marketing strategies, such as marking down items, can be used for fixing company mistakes (not correctly predicting consumer purchases) rather than just to get out-of-season inventory off their shelves. Marketing isn't always used for launching a new product or selling services, it's also used for crisis management.
https://www.forbes.com/sites/stevendennis/2022/06/07/too-much-of-a-goods-thing-retailers-are-drowning-in-inventory/?sh=64dbdcf112fd
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