Business have trimmed inventories significantly--and that's starting to bite them in the sale. Here's the raw data:
There was good reason to cut inventories: sales were falling. This is a recession practice I recommend in Businomics. However, the tight inventories are now limiting sales gains.
Here's a personal example. I bought a car last spring, and now I want snow tires and wheels for it. But the tire store I love did not have my size in the type of tire I wanted.
(You may be surprised that anyone would love a tire store, but if you live in the Pacific Northwest, you know who I'm talking about. I have been a very, very loyal customer for 20 years. I don't comparison shop other stores, I just to in and buy.)
So my fav store lost a sale. I went elsewhere. No deals to be found, so some sales are probably not going to anybody at all. By the first real snowfall, there will be no studless snowtires to be found anywhere, despite people clamoring for new tires.
From an economic standpoint, this will limit economic growth.
From a business standpoint, my favorite store has double whammied itself. First, it lost a sale. Second, it gave me a reason to go to a competitor. That's like telling your girlfriend she should date other guys--not a way to build a strong relationship.
I know money is still tight, the economic outlook is still uncertain, but if you cannot serve your loyal customers, you will have no loyal customers.
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