With inflation driving up gas prices and bills, consumers are faced with tough spending decisions, such as when the seasons change, when kids start school, and when to budget for Christmas gifts. FashionUnited spoke to Nikki Baird, former retail analyst and vice president of strategy at Aptos, about how this will impact our wallets for the rest of 2022.
“Do we have enough truck space to load the containers, enough drivers, crane operators and trains to move them?” asks Baird. “Then there’s the capacity to unload the goods at the other end and deliver them to the stores.”
Less than a year ago, supply chain issues dominated the headlines as the movement of goods ground to a halt. But as society gradually opened up, Baird says we faced a new supply chain problem: an inventory shortage. China’s zero-tolerance policy towards Covid has not seen factories reopen like many other global manufacturing hubs, and while supply chain members attempted to work off the backlog that had created, retailers were busy with over-ordering.
“They ordered a lot expecting they would get very little, so they tried to rig the system a bit,” says Baird. “Factories and fabric manufacturers had to decide whether they wanted to increase capacity to meet this demand or whether it was phantom demand.”
The domino effect of phantom demand
Retailers are only now receiving the orders they placed during lockdown fever. “I’ve spoken to retailers who said they received orders in May or June that they were expecting for the 2020 holiday season,” says Baird. “As for the chaos in the supply chain, it’s still very real, it’s still an issue.”
Back-to-school is an upcoming time when clothing sales are high and will be affected. Last year, retailers resorted to dinosaur-themed space or merchandise because they didn’t have inventory to reflect new movies or content. “It’s the same this year, not as bad as ’21, but you might find one Jurassic WorldT-shirt, a Buzz Lightyear lunch box,” says Baird. “Retailers preparing for this challenge ordered themed clothing. It’s not licensed merchandise, but they’re doing what they can as there’s no telling yet what will show up in the shipments.”
Another problem is that retailers have not adjusted their orders in anticipation of changes in consumer demand. “They have continued to adjust to buying behavior during the pandemic. So when you go to the stores, you still see a lot of athleisure, while employers are now trying to convince their employees to go back into the office. So there is a mismatch between inventory and what consumers actually buy,” explains. Baird.
Travel-related spending, another big category for this time of year, has caught retailers by surprise. They didn’t anticipate it soon enough to be prepared for consumers who are now ready to buy.
Is sustainable shopping a priority for consumers in 2022?
As we are now largely on the other side of the pandemic crisis, this product surplus appears to be becoming a sustainability nightmare. Most likely, the merchandise will be discounted and eventually end up in landfill. Sustainable sourcing is at an interesting crossroads, Baird believes.
“Now you have to consider inflation as well. We are seeing data showing that as inflation rises, consumers are less willing to pay more for sustainable purchases. But that’s predictable. Consumers have been pretty consistent in telling us that while they prioritize sustainable goods, they are not necessarily willing to pay a premium for them.”
But the demand pressure for sustainable options will not abate. Despite the increased costs associated with producing eco-friendly goods, Baird says only those retailers who can offer sustainability at the same price will be successful. “Retailers are very focused on Levis reducing the amount of water in a pair of jeans or Allbirds using more eco-friendly materials in its soles, and while these things can save a company money, consumers aren’t willing to pay more for them. They see it as if it should be a choice between two sneakers of the same price, and if one is sustainable and one is not, they will choose the sustainable one.”
Baird sees a potentially positive shift in fashion sustainability that she has seen in the financial sector: headwinds to greenwashing. “Regulators go after companies that make ESG claims and banks that run ESG funds and indices because the qualifications weren’t as rigorous.”
Asked whether consumers will scale back their fashion spending amid financial uncertainty and rumors of a looming recession, Baird has seen little sign of the fashion brands using Aptos solutions. It even offers an optimistic view. “What will make up for it is a commitment to go back to school. Consumers are cutting spending elsewhere to fund their children’s back-to-school expenses, and this is heavily linked to clothing.”
Looking ahead to the holidays and gifts, another time of the year when there’s a lot of clothing turnover, Baird says, “Instead of a big TV screen, maybe this year you’ll get a sweater. I think we will see an impact on consumer electronics and expensive items as consumers move towards smaller luxury items like fashion purchases.”
This article originally appeared on FashionUnited.uk. Translated and edited by Simone Preuss.