New York – As high inflation drives up gas and bill prices, consumers will face tough spending decisions as the seasons change, kids go back to school and budgets are weighed for holidays. FashionUnited speaks with Nikki Baird, former retail analyst and Vice President of Strategy at Aptos, about how our wallets will be impacted for the rest of 2022.
“Do we have enough truck chassis to load the containers, enough drivers, crane operators, trains to transport it?” asks Baird. “And then there’s the capacity to unload the goods on the other side and deliver them to the stores.” Less than a year ago, supply chain problems were in the news when freight traffic came to a standstill. But as society reopens in fits and starts, Baird says we are faced with a new supply chain problem: an inventory bottleneck. China’s zero-tolerance policy towards Covid has not matched many other global manufacturing hubs’ factory reopening, and as supply chain members tried to catch up, retailers were busy making catch-up orders.
“They ordered a lot expecting little, so they tried to get around the system a little bit,” Baird says. “All factories and fabric manufacturers had to decide whether to increase capacity to meet this demand or whether it was a phantom demand.”
The domino effect of the phantom question
Retailers are only now receiving orders placed in the fever of the lockdown. “I spoke to retailers who said they received orders in May or June that they expected for the 2020 holiday season,” Baird said. “So as for the chaos in the supply chain, it’s still very real, it’s still a big deal.”
One of the upcoming periods in which a lot of clothing is sold is the period of the ‘back-to-school’. Last year, retailers took out space- or dinosaur-themed products because they didn’t have inventory that matched the new movies or new content being released. “It’s the same this year, not as bad as 2021, but you might find one Jurassic World T-shirt, one Buzz Lightyear lunchbox,” Baird says. “Retailers anticipating this challenge have ordered themed clothing. They are not licensed items, but they are doing what they can, because it remains to be seen what will be delivered.”
The problem is compounded by the failure of retailers to anticipate changes in consumer demand. Baird: “They’ve continued to double down on the pandemic buying behavior, so when you come into the stores, you still see an awful lot of athleisure, while you have every employer trying to convince their employees to go back to the office. There is therefore a mismatch between the stock and what consumers buy.”
Travel-related expenses, another big category for this time of year, has left retail unprepared. They didn’t anticipate it early enough to be ready for consumers to buy now.
Is sustainable shopping a priority for consumers in 2022?
Now that we are largely on the other side of the pandemic crisis, all this surplus product seems to be turning into a sustainability nightmare. Most likely, the merchandise will be discounted and end up in the landfill. Sustainable procurement is at an interesting crossroads, Baird believes.
“Now you have to add inflation as well. We see data showing that as inflation increases, consumers’ willingness to pay more for sustainable purchases decreases. But that’s predictable. Consumers have told us quite consistently that while to durable goods, but that they are not necessarily willing to pay a premium for them.” But the pressure for sustainable options will not go away. Despite the higher costs associated with making eco-friendly goods, only retailers that can showcase sustainability at the same price point will be successful, according to Baird. “Retailers are very focused on Levi’s reducing the amount of water in jeans or Allbirds using more environmentally friendly materials in their soles and while those things can save money for a business, consumers aren’t willing to pay more. They see it as a choice between two sneakers of the same price and if one is durable and the other isn’t, they choose the durable one.”
Baird sees a positive change in sustainability in the fashion she observes in the financial sector: Pushback on greenwashing. “Regulators are going after companies that make ESG claims and banks that operate ESG funds and indices because the qualifications have not been as strict.”
When asked whether consumers will cut their fashion spending given the financial uncertainty and talk of an impending recession, Baird has seen little evidence from the fashion brands using Aptos solutions. She even gives an optimistic note. “What it will offset is a commitment to going back to school. Consumers are cutting discretionary spending in other areas to fund their children’s back-to-school purchases, which is clothing-intensive.”
Looking ahead to the holidays and gifts, another time of year when a lot of clothing is bought, Baird says: “Instead of a big TV, you might get a sweater this year. I think we’ll see an impact in consumer electronics and the big ticket items, with consumers shifting to smaller luxury items such as fashion purchases.”
This article previously appeared on FashionUnited.com. Translation and editing into Dutch by Caitlyn Terra.
Source: fashionunited.nl by fashionunited.nl.
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