Businesses tied to the housing market, such as appliance wholesalers, are struggling with a glut of product due to slowing home purchases. This is causing companies to try and get rid of their extra inventory.
According to the most recent logistics managers index, businesses have been able to clear out their extra inventory, but not all industries have been as successful. Wholesalers in the furniture, appliance, heating, plumbing, air conditioning and hardware equipment industries have been particularly affected.
The main issue lies in consumer spending. Home sales have been falling over the last year, so people aren’t buying as many building supplies or furnishings. Similarly, electronics companies misread the spike in demand early in the pandemic, leading to an overabundance of stock.
The inventory bloat has caused companies to tie up a lot of money in their stock. This is especially difficult for smaller firms, who don’t have the large reserves of cash that bigger companies have built up during the pandemic. Furthermore, getting rid of the extra inventory is costly, as it requires discounts, promotions and advertising.
In conclusion, businesses tied to the housing market are struggling with a glut of product due to slowing home purchases. This has caused companies to tie up a lot of money in their stock and to get rid of the extra inventory at a cost.