We were curious to see whether or not there would be an increase in inventory among retail stores over the past three years. We chose to look at two sectors General Merchandise (SIC 5300) and Apparel and Accessory Stores (SIC 5600). These sectors include companies like Walmart, Target, GAP, and American Eagle. In both sectors, inventory grew fairly steadily since 2011. We chose to use the sector averages for the inventory accounts in each year since the vast majority of companies followed the same trend.
There are a few possible explanations for the growth in inventory. One explanation could be that “brick and mortar” stores recognize that their competitive edge is that their customers do not have to wait to buy products from their stores. The added convenience of purchasing and returning goods is enough to justify whatever price difference may exist in a price sensitive industry between them and online stores. The “brick and mortar” stores’ competitive edge is lost if they do not retain enough inventory in their stores and warehouses to keep the shelves and racks stocked with any item the consumer may desire. This is merely a possible explanation as there could be many other causes influencing this observed trend.
To see for yourself in more detail, head to the Benchmark tool, look at SIC Codes 5300 and 5600, and select Inventory as a data point.
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