First recall all business news is about big business... this is the problem of commodity, not specialty. The news about big business is their inventories are monstrously overstocked (also read the comments section).
Again, this, if accurate, relates to commodity items being vended through those channels. What I read is yet another reason online marketing is not worth the effort. This gets complicated, but perhaps I can elucidate: that double inventory is on the books. There are inventory carrying costs and in cases as described here, those costs are no charged off to online marketing. This means the costs are higher than accounted for, and net profits lower (when properly accounted for negative anyway).
The quote states "out of stock kills customer loyalty." That makes no sense, I think what they wanted to say is out of stock kills customer sales. This I can speak to personally. My first book was initially (2001) offered on Amazon through iUniverse in a cooperative agreement involving the cutting edge print-on-demand (POD) technology. Since, as entrepreneurs never take risks as Drucker noted, I went with POD to publish my book, at first. Well, print on demand necessarily means "not yet exist", and so any POD book was listed on Amazon as out of stock. I could and did buy my own books from iUniverse in quantities of 100 and list them on Amazon on my own account, and therefore the book was "in stock" when I did that. When in stock, it sold like crazy, the times I ran out, the sales died. Lesson learned.
POD model poorly remunerates the author, but then there is no risk. Being an importer, I did a bit of research and learned I could buy 1000 books from the best source in the world at the price of what I could buy 100 POD from my publisher, iUniverse (and it turns out, much better quality book). Well, since 100 moved well, I could risk using the same money to buy 1000 and if the other 900 did not sell, I am out nothing.
The 1000 sold quickly, and so I kept importing 1000 copy min orders over the years. All this is detailed in a how-to book I wrote, (Perish Your Publisher.)
Back to inventory build-up:
J.C.Penney recently announced its plan to test out a new business model with its supplier, Ashley Furniture. J.C.Penney won’t carry any Ashley Furniture inventory in stores or in its distribution centers. Instead, it’ll just hold floor samples and when customers choose to purchase an item, it will ship direct to consumer from Ashley Furniture. If successful, J.C.Penney hopes to extend this showroom strategy to other departments like appliances.So JCPenney has discovered drop ship? That is going to save the day? JCPenney has been doing this since 1904 in Kemmerer Wyoming. So has every other mass merchandiser. How can they be thinking this is new or different? Perhaps there is not any institutional memory at JCPenney. This is just weird.
Anyway, inventory is a problem. It is too much, and the wrong selection. Storing it costs too much. Right now, "money" costs nothing, indeed we have negative interest rate. So businesses can afford to sit on inventory and waste the space to store it. This means there is no real need to unload it, in spite of the efforts noted in Mish's article.
If and when interest rates rise, then it will all need ot be dumped, at once, by that time even less attractive and more "distressed." (The biz term "distressed merchandise" is so funny. No such thing, only "distressed merchants." I know, I've been there.)
Nonetheless, super low prices in commodity can take money from specialty. How to play it?
Fold in the super cheap with yours. Nordstrom has their outlet The Rack, if you are a clothing retailer, buy dresses which anticipated a retail at $100 but cost you $5 and sell for $19.95 hanging on a rack, showing marked down form $100. Not a lot of inventory, just a no risk selection, and get that money that the big boxes were aiming for.
Real Estate is feeling pressure. We need a huge crash to spur recovery at the specialty level (nothing can be done for the mega-stores.) If you love talking to customers, then keep an eye open for space to rent super cheap month to month after the crash, for your bsuiness.
Feel free to forward this by email to three of your friends.