Expect Price Slashing for
Non-Essentials on Amazon
By David Oberlander – July 18, 2022
In June, inflation in the United States reached a four-decade high, with gasoline leading the charge in rising prices. With recession sentiment on the horizon, consumers are tapering expenditures on non-essential consumer goods as more allocate or plan to reserve their disposable spending on essentials such as food, gas, and household goods.
On the supply side, due to relentless supply chain disruptions from port delays to COVID lockdowns in specific manufacturing hubs in China, inventory forecasting has never been harder to match supply with demand. When forecasting, the longer the lead time, the less accurate you are. Since the pandemic’s beginning, some businesses are facing production cycles as long as one and a half years.
With such uncertainties in lead time, many retailers and online sellers piled up inventory in anticipation of continued demand from government cash handouts and stimulus leading to asset price inflation. As a result, even if consumer demand is forecasted to decline, shipments will still be in route and orders under production. This mismatch in supply and demand will cause retailers to slash prices to clear excess inventory, as indicated by Target earlier this month that its profits would drop as it canceled orders and offered discounts.
From the perspective of Amazon FBA sellers, as peak season storage looms, where storage cost triples from October to December, I foresee massive discounts from overseas Chinese sellers, which comprise two-thirds of the merchants on Amazon. For some FBA sellers, deals are already underway as Prime Day discounts extend past Prime Day.