Three weeks ago, analysts quoted government data analyzed by Michigan as saying that the US included furniture, household goods and electrical appliances, building materials and gardening equipment. And retailers in the category of "other general goods", including Walmart Inc and Target Corp, saw a record surge in inventory-to-sales ratios.

Analysts believe that this is the embodiment of the reversal of the bullwhip effect.

Since then, the ratio has continued to soar and is now at its highest level since the dotcom bubble burst.

Bullwhip effect is a phenomenon of distorted transmission of demand information in the supply chain. when suppliers at all levels of the supply chain only make supply decisions based on the demand information from their neighboring subordinate sellers, the unauthenticity of demand information will go up against the current of the supply chain and magnified step by step.

As a result, when demand heats up and retailers quickly order goods to cover their positions, the quantity ordered usually exceeds the actual demand, resulting in supply shortages among wholesalers and upstream manufacturers, which in turn leads to a rise in the price of end products. further stimulate production to rise.Then once demand starts to cool down, retailers will accumulate stocks.

What happens next? Deflation in retail goods plummeted

What does the sharp rise in inventory-to-sales ratio mean for retailers and commodity prices?

Analysts say that although it is certain that not every commodity will reduce its price, for example, the bullwhip effect of commodities usually lasts for several years and takes longer to show up.But other goods, such as$Walmart Inc (WMT.US) $和$Target Corp (TGT.US) $Products will suffer a deflationary collapse not seen since the global financial crisis in 2008, as retailers start a spontaneous wave of destocking.

Recently, some major Wall Street banks also reported that retail goods are expected to experience unprecedented deflation in the coming weeks.

Morgan Stanley strategist Michael Wilson, one of the most bearish analysts on Wall Street, focused on the decline in the US economy as a whole, especially retailers' profit margins, in his latest weekly report.

Although there has been a slight increase in oversales, a more worrying problem is, he wrote.The inventory of the whole industry increased by about 30% year-on-year, and sales increased by about 0% year-on-year, which means about 30% excess inventory.Although there was no price cut or profit margin pressure in the first quarter, this should happen in June and July.

In fact, "Store inspections show that big discounts have begun since the weekend of the Memorial Day holiday. Discount pressure may accelerate throughout July". As more and more retailers are offering discounts, "retailers have to offer bigger discounts to attract consumers to buy, and this is a bottom-to-bottom profit margin competition in order to empty inventory." "

However,To make matters worse, due to the delayed nature of the bullwhip effect, Wilson believes it will take a while for retailers to reduce forward inventory orders! Due to the delay in the supply chain, the company's order currently has a delivery time of about 8 months.Shockingly, this means that today's decision to cut forward orders may begin to eliminate inventory problems in the first quarter of 2023, but is unlikely until then.

Therefore, Wilson concluded: "We are likely to see a wave of discounts until December, as inventory orders for 2022 have been placed.」

Is there a good opportunity for the American people to "fleece"?

The Wall Street Journal also reported that"A big discount is coming" because "there are too many things in the store".

Target Corp, Walmart Inc and$Macy's (M.US) $It was recently announced that they began to receive returns of large quantities of outdoor furniture, household goods and electronics (if Morgan Stanley is right, the delivery time is indeed eight months, and they will continue to receive these products until 2023! ), and back during the epidemic, these were things that everyone wanted to buy but could not buy.

The problem for retailers is that the prices of sweatpants, sofas or almost everything else will fall sharply, and analysts say prices are expected to start falling around July 4, when a full-blown retail deflation tsunami breaks out.

Mickey Chadha, an analyst who tracks the retail industry at Moody's Corporation's Moody's Investors Service, said: "There will be unprecedented discounts.」

As Americans shift their spending to services they missed during the epidemic, such as concerts, dining out and travel, retailer discounts are part of an effort to get shoppers interested again. Analysts say there are expected to be big discounts on oversized sofas, appliances and courtyard furniture because it is more expensive for companies to store them in warehouses.

Chirag Modi, who is in charge of supply chain execution and warehousing at consulting firm Blue Yonder, says he is looking for electronic retailers that specialize in selling large goods such as furniture to lower prices. You can look for e-commerce retailers that specialize in large goods, such as furniture, to reduce prices.

If your drawer is not stuffed with home-office casual clothes, the store will try its best to get you to take them off the shelf. "now may be a good time to buy sweatpants," said Dan Wallace-Brewster, marketing director of e-commerce software company Scalefast. They are sure to be on sale this summer. "but he says office clothes may not be on sale.

Some retailers, such as Target Corp, have announced plans for big discounts. Last Tuesday, Target Corp warned that profits would fall, saying that because the company had too much inventory, it would need to cancel orders with suppliers or offer more discounts to customers.

Analysts say companies with strong warehousing capacity such as Walmart Inc are more likely to continue to hold excess inventories.

Retailers such as Gap that sell private-label clothing may be particularly inclined to reduce inventory because they cannot pass on costs to others, Chadha said. Companies that run other brands, such as Macy's, may return some of their surplus products to producers.

Wallace-Brewster said consumer electronics is another product that can enjoy a discount on excess inventory because the shortage of chips shows signs of easing. The prices of goods such as televisions and laptops are about to be greatly reduced.

Wall Street has previously mentioned that recent news shows that South Korean consumer electronics giant Samsung has not been spared the pressure of inventory. Samsung Electronics has asked suppliers of components for televisions, household appliances and smartphones to delay packaging shipments of semiconductors, electronic components and end products until the end of next month because of overstocking.

See wisdom research believes that Samsung's move shows that the demand for a variety of electronic products has begun to slow down significantly, and the highlight moment of demand for semiconductors may no longer be.

Analysts say that if you miss the peak sales season in a few weeks' time, don't worry: it's likely to last until the start of the school season or longer. But don't expect luxury prices to fall, says Oliver Chen, retail analyst at Cowen, an investment bank. If anything, the price of luxury goods such as handbags and shoes will continue to rise. "demand is so strong and overall this is an industry with limited supply, so a completely opposite rebalancing is taking place," he said. "

that,If the above analysts' comments come true, does this mean that US core inflation is likely to cool sharply in the coming weeks?