Think back to the winter of 2021, when stores struggled to keep shelves stocked with everything from Xbox consoles to artificial Christmas trees. Three rounds of stimulus checks and the promise of new Covid-19 vaccines had primed consumers to go big for the holiday shopping season, but a gummed-up supply chain and a labor shortage left retailers scrambling to meet the soaring demand.
Now, the pendulum has swung the other way. Companies are stuck with too much stuff, their warehouses are full, and they’re taking some creative measures to get rid of that excess inventory, according to Mark Cohen, the director of retail studies at Columbia Business School.
Economists call this phenomenon the bullwhip effect. The term describes how businesses tend to react to a surge in demand by over-ordering to avoid shortages. That distortion gets passed along, and is typically amplified, at each step of the supply chain, creating inefficiencies like long wait times for products and the surplus we’re seeing now.
Lisa Anderson, a supply-chain management expert and the president of LMA Consulting Group, says if you’ve got the cash on hand now,”it’s not a bad idea to start your holiday shopping early this year.”