The National Retail Federation (NRF) this week increased its U.S. retail sales forecast for 2018, indicating that sales are expected more than previously forecasted earlier this year.  While retailers will likely view this upward forecast as a forerunner to be a very optimistic indicator for the all-important second-half of the year, caution is advised.
After forecasting U.S. retail sales to grow in a range of 3.8 to 4.4 percent earlier in the year, NRF now expects full-year 2018 retail sales to increase to a minimum of 4.5 percent. The forecast excludes automobiles, gasoline and restaurant retail sales. Noted is that: “Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation’s consumer-driven economy.”
Noted was that retail sales in the first-half of 2018 grew 4.8 percent year-over-year and have been trending up 4.4 percent year-over-year in the most recent three-month period. That would imply that the new revised number of 4.5 percent is a no-brainer or could be higher.
However, the report does validate that U.S. retailers have been accelerating inventory purchases and stocking warehouse earlier than past years, in order to avoid expected U.S. tariffs on imported consumer goods expected to go into effect in the Fall period. Indeed, U.S. port data on inbound container volumes continue to reinforce that retailer inventory buying has been accelerated in preparation for second-half holiday focused sales.
The current risk for retailers is that holiday sales forecasts for specific item-level products indeed occur.  Bringing in such products earlier than usual incurs added warehousing, logistics and inventory carrying costs. If certain products turn out to have hotter than expected sales volumes, the ability to gain last-minute added inventory may be hampered by the imposition of steep added tariffs. If certain products turn out to be very slow sellers, than retailers may be forced into deep discounting to move inventory and reduce already inflated warehousing costs.
Readers may have noticed that some retailers are already placing holiday related merchandise in stores or on online sites in attempts to move inventory and assess overall consumer demand much earlier in the holiday cycle. The more that occurs, the more other retailers will be compelled to offer holiday merchandise much earlier in order to tap consumer budgets.
We anticipate that the next six months will have retail sales and operations planning (S&OP) teams conducting frequent reviews of product sales volumes of individual  items in attempts to time the optimal period to promote products. Those retailers that have invested in more advanced sales tracking and consolidated Omni-channel inventory management will gain benefit while others may struggle. The goal is always the ability to sell item at expected full-price, but that often relates to having deep market intelligence and agile supply network capabilities.
Indeed, optimism for retail sales volumes prevails but caution signs must also be factored. As in past years, the success of the new Omni-channel world of retail is ever more predicated on the interactions and integration of merchandising and supply network capabilities, each with equal weight and agility. Retailers have taken on added inventory risks which could either payoff in added sales and profits, or come back to spillover to added bloated inventory levels by the end of the year.
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