Feeling the Effects of Weak Consumer Demand: Alexis Asks

Managing editor Alexis Mizell-Pleasant asks industry experts about various topics in the supply chain. Consumers and retailers are struggling, and weak demand is creating the perfect conjunction for a slower slow season.

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The holiday boom always leaves holes. In the wake of current economic conditions, this first month of 2024 has left major pitfalls, as weak consumer demand leaves retailers and manufacturers scrambling. 

No, this phenomenon isn't anything new, but the situations many consumers, and providers alike, find themselves amidst rising costs in stores, real estate, etc. is creating the perfect conjunction for a slower slow season. 

Scott Whiffin, executive director at supply chain and logistics consultancy at SCALA, explains that a lot rides on this all-important golden quarter and it’s been rocky to date, with retail sales slumping to the lowest level since the February 2021 lockdown in October and November seeing disappointing levels of sales growth despite Black Friday sales.

“In light of this, some retailers may still have a backlog of stock to shift. Others – particularly those who trade directly with the consumer or via platforms such as Amazon and depend on this quarter - will have invested in stock which is currently sat in warehouses," says Whiffin. "This is particularly the case for companies with manufacturing operations based in the Far East which forecast months ahead of demand and may have been particularly optimistic to try and cash in on the traditional peak."

This is the time we see flash sales, dramatic cost dips and quick pricing decisions to avoid the bear of excess stock past the height of festive gift giving. Whiffin describes that the last year has seen declining inventories and less demand for warehouse space, but excess stock and the anticipated weak demand may well impact this situation in the first quarter of 2024.

"Many third-party logistics providers operate on very thin margins and have already been hit by lower volume demand, high inflation and high interest rates. A price war on warehouse space would only add to this headache going into the new year," says Whiffin. Those fast actions for pricing, warehouse strategy and inventory management are calls to make now before the snowball of winter holidays becomes a yeti of additional cost.