Why Everything Is On Sale: The Bullwhip Effect | WSJ

If it seems like there are more sales lately, it’s because there are. General retailers are shedding excess inventory. Why? Just blame the bullwhip effect.
WSJ’s Jon Hilsenrath explains what it is, and what it means for the economy.
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#BullwhipEffect #SupplyChain #WSJ

[@jaschan2006]

I just assume sellers inflate the original price by a lot then give a deep discount to give the illusion of good deals…

[@beatjunkybg]

Yeah, some people forget that stores never sell anything at a loss, if you see -70% that only means the company has been extremely greedy with its usual mark up

[@alexb8926]

Yes young grass hooper you are correct 🦗💯

[@frostreaver1]

Everything is still more expensive compared to 1 year ago. This article rings false and seems to be an attempt at increasing consumer spending. Company inventories have increased due to supply concerns, but now with the current recession there is a huge drop-off in demand. They aren't dropping prices like they need to because otherwise revenues, inventory valuation, and net profitability are impacted. If that happens stock price plunges further putting them in serious risk of not being able to maintain debt. This is worse than 2008 and could lead to a cascading failure. Printing money won't fix it this time due to rampant inflation.

[@minaryeon9259]

Happens often

[@joshs3916]

Saw this on Black Friday. “Sales” price was $20 more than pre “sale”

[@ebeyslough]

Discounted junk is still junk you have to get rid of sooner or later.

[@JA238979]

As a local news station reported in August, "Before you buy any of these things, remember that they are discounted because people did not need them."

[@samanthaball5980]

Amen to that

[@MrErdem95]

It's not they're on sale. They're just back to their normal prices. We're yet the see the "sale" mode.

[@JA238979]

With inflation, so something that was $10 a year ago is already discounted if the price has not increased to $11. If you consider the recession, inflation and engineered obsolescence, discounts usually don't mean much. My computer keyboard cost $20 when I bought it several years ago, and now I see the same one "on sale" for $25 - marked down from $35.

[@rephaelreyes8552]

@@JA238979 you can probably buy the same keyboard on eBay for $5. If you’re looking for an item that’s been out in a while, you’re more likely to find a cheaper price on eBay

[@lawerencemiller9720]

As an elder millennial, one of the few advantages is having lived through the Great Recession. My advice. Reduce unnecessary expenses, increase your savings by investing in financial markets and do not sell. One thing I know for sure is that diversifying your income can help insulate you from much of the craziness going on in the world.

[@kimyoung8414]

True..... I'm thinking of investing in stocks or digital assets to grow my money for the first time, but I lack the in-depth knowledge and mental toughness to deal with these recurring market conditions. please any advice or pointer on how to outperform the market producing good returns

[@alexyoung3126]

It's true... It just takes a good mindset and nerves of steel. I was deeply invested in 2017/2018 in a well-diversified portfolio of stocks and digital assets that grew 4x with capitalization, venturing is not necessarily just about funds but also to be well informed. It's a long term plan for me so I invest and reinvest

[@checkforme234]

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[@kimyoung8414]

@@checkforme234 I searched for Ingrid by her full name and she seems quite trustworthy and knowledgeable. She is a fiduciary acting in the interest of the individual. So I left a message on her site, I hope she will answer soon.

[@joeyjoejoejunior3859]

SCAM, SCAM, SCAM.

[@MrGurrr]

I keep hearing about this "sale". Every time I go buy something it's more than last week. I would like to know where are these sales.

[@jgalvan09]

Are you buying clothes every week???

[@zzzzzzzzzzz6]

Sucks for the stores -- we don't trust their "deals" anymore because most of it is artificial. Even knowing about the bullwhip, it won't affect every market, so I still have 0 way of knowing if something is actually a deal or if I'm getting ripped off. The stores made their bed, they can lie in it.

[@minaryeon9259]

Most sales are artificial.

[@noahway13]

Who cares? If it is a good price, buy it. If not, then don't. I'm not gonna pass up a $200 64 inch TV because I might be afraid it is a gimmick.

[@higherup9862]

I see stuff on sale and it's still too expensive, I mean even if I had the money the products are not worth the prices. The "SALE" sign is psychological nonsense that makes you buy things you wouldn't buy otherwise, stuff you don't need, stuff you actually don't even like. But the "SALE" sign gives you the feeling of being special, being a winner, being smart, being the exception, the idea that the clock is ticking. If any seller is rushing you into buying anything, you are certainly getting ripped off.

[@lashlarue7924]

I work in the import business. This piece from WSJ completely misses the mark. The issue isn't the bullwhip effect. The issue is overwhelmed supply chains causing huge spikes in lead times. The massive queue length of vessels waiting to get unloaded at ports means that everybody freaks out and desperately over-orders just to ensure they have something to sell. A year ago they missed 3 months of sales because their containers were stranded at the port, and now that inventory glut has to be closed out at a loss. Just-in-time inventory doesn't work when you have a port that can handle 100 units is forced to handle 120 units; the breakdown in throughput is non-linear and lead times explode. Bullwhip effect is a story about UPSTREAM overproduction - whereas this is a story that's all about DOWNSTREAM effects of a breakdown in JIT caused by a capacity shortfall in the supply chain.

[@aidan_kang]

Thanks for this perspective. And it sounds very reasonable. But why would the inventory glut need to be closed out at a loss? If they over-ordered, expecting that they'd have a year's worth of inventory to sell, then they'd just sell it over the course of the year right? Why the rush to discount things? Genuinely curious.

[@lashlarue7924]

@@aidan_kang Cash flow. Seasonal and/or perishable product. Contractual obligations of importers necessary to keep exclusivity for certain trade relationships. Different businesses have different amounts of relative bargaining power, some have to eat losses because otherwise they'll lose the relationship. Therefore they close out the product and turn it into cash, but they eat the accounting loss. Missing 3-4 months' sales because the entire supply chain suddenly "blew up" due to capacity being overwhelmed kills certain businesses. You either cut costs to the bone and survive by closing out product, or you file for bankruptcy.

[@kpsalm]

As someone who used to do supply chain planning, this was a fantastic very knowledgeable explanation. You are spot on sir. 100%

[@jayhay1237]

JIT did work! It lasted long enough for the consultant to get out the door with a big grin on her face?

[@lashlarue7924]

@@jayhay1237 Actually there's nothing fundamentally wrong with JIT or lean. The issue is that lead times must have gaussian (i.e. 'normal') distributions for the planning to work. Once you exceed the capacity constraints of a choke point, the lead times "blow up" and are no longer normally distributed. Then you have every supply chain planner across the country simultaneously freaking out and increasing their par values across the board because they all realize they need more buffer against uncertainty. This is why Ford Motor Co has a small lake of F-150's sitting around unfinished waiting on microchips to arrive.

[@johnpeterson9303]

Things are on sale? I didn’t notice over all the inflation lol

[@magahongkong4664]

Well I knew about this months ago. Doesn't take rocket science to tell that. Imagine having to pay more for essential and having geopolitical conflict leading to higher expenses for corporations to produce goods. Of course those with luxury goods will be hurt the most because essential can go up in price and people have to pay for them but luxury goods and services aren't needed

[@Robertgriffinne]

With the way the market is moving, we'll mostly hold for longer than 2030 to realize profit gain, I think a video on "How to profit from the present market" will be more effective, I mean I've heard of people making upto 250K within few months and I'd like to know how.

[@marianparker7502]

well the bigger the risk, the bigger the reward and such impeccable trades are better executed by professionals.

[@Natalieneptune469]

@@marianparker7502 That right, I started investing sometime in 2018 and by late 2019, I pulled a profit of over $750,000 with no prior investing knowledge or skill, I was basically just following the guidelines set by the financial advisor I use, so you don't necessarily need to be a perfect investor or do the hardworks, just have a professional guide you.

[@Robertgriffinne]

@@Natalieneptune469 How can one find a resourceful FA, I buy the idea of employing their services, its a shame market crashes as of late have become a sort of habit for stocks

[@Natalieneptune469]

@@Robertgriffinne My advisor is ''Corinne Cecilia Heaney'' In terms of portfolio diversity, she's a genius. You can glance her name up on the internet and verify her yourself. she has years of financial market experience.

[@Robertgriffinne]

@@Natalieneptune469 Awesome! your potential seems limitless. I'm fascinated with investing, I’m delighted to engage in this opportunity, I just found the professional’s web page and have already written her

[@LuisVelazquezLV3]

everyone who went to business school knows this as demand/supply management 101.

[@freshofftheplane]

Well now you get to live through it at an unprecedented scale!

[@gabrielfair724]

An important thing to point out about the model of supply and demand is that it isn't as effective as a model as it once was. Both supply and demand today are artificially engineered. Today companies will work to intentionally reduce the supply or demand of their product or the product of a rival business. This can be though marketing, planned obsolescence, political rent, and/or cartel actions. Some companies are much better at this than others. Withholding product to give an impression of scarcity (Koch brothers oil-tanker schemes), dumping perfectly good milk b/c the government gives farmers a check to ruin supply, futures trading driving a cost....

[@LuisVelazquezLV3]

@@gabrielfair724 definitely depends on the product, if you are talking commodities sure, there is some truth to all that.... non-commodities and services, not so much.

[@navidntg6082]

they are still expensive, they just have sales tag on them

[@GoodnWise]

Pre pandemic, the “just in time” or “just enough “ approach to inventory didn’t work that well in my opinion. Empty shelves with just one or two items taught buyers to not to bother with going to the stores and instead to shop online.

[@1stGruhn]

Just in time production is derived from Toyota's lean approach. Why keep excess inventory when you have to pay to store it, it is more efficient to keep a day/week's worth of needed stock than months/years worth. The failure was not accounting for the ripple effect of supply chain impacts. Toyota didn't succumb to the production chain impacts for a while because they had stress tested their supply chain and found chips to the main lynch pin and they stocked up early (thus it took them around a year before they ran out). Other car manufacturers took only a few months. The other issue has been over-reliance on China as a production hub. China's zero Cov policy has killed their reliability as a production hub and has caused many companies to begin construction in other areas to diversity their sources. But that takes time to build and China is still causing supply chain disruptions.

[@alohatigers1199]

@@1stGruhn Oh yes blame China and not because of greedy profit driven companies.

[@AmaniLindsey]

When everything is on sale than nothing is on sale!

[@abertv1333]

I have to say. Raising my kids on the mountain in a ski town I have been loving this normally gear intensive sport going so much cheaper. But it's almost certainly signs of a hard recession when ski yups are selling stuff 70-90% off. There is most certainly a storm brewing.

[@vkrgfan]

Absolutely, calm before the storm.

[@jollyranch1026]

Thanks for the update I never knew about sales.

[@allu717]

Corporate profits going down? How horrible! How will we survive this terrible outcome?

[@MomopilotCool]

Gonna take out Mr Krabs smallest violin

[@p4olom]

Corporate profits going down? You know what else happens when that happens? Job loss. Good job celebrating others’ losses 🤦‍♂️

[@MomopilotCool]

@@p4olom job losses happen regardless of profitability. I don't benefit from high corporate profits either.

[@frostman9661]

@@p4olom God forbid corporations take a small hit to their all time record profits to pay their employees more and keep them working even through "hard" times.

[@halo2pro9]

@@frostman9661 eventually they run out of money, that is a irresponsible business decision and will actually hurt everyone in the long run. btw those are record nominal profits not inflation adjusted. those profits were reflecting on the increased money printing from the government and destructive lockdowns.

[@daniels.8723]

It's a glut following a shortage. Let's hope for a home glut to lower prices

[@manoftomorrow5987]

This is a problem with almost all industries. 2022 performances across the board has got everyone shocked, its almost as if businesses thought that 2020-2021 sales perfromance would remain forever. Smfh.

[@HS-lb8kv]

No, the sales are on inflated prices. I bought a pool cue case for $45 in 2017 and in 2022 the exact cue case is $125, so even if it is discounted by 25% it is still higher. Because of higher prices demand has decreased and inventories are high. Deflation is needed to bring down the prices where the masses can afford.

[@michaelharris5281]

The way that I look at it is they do this every year around October as new stuff comes in and they just need to clear off shelves space. If they can't clear it out then they'll continue to mark stuff down until the can clear out that space for new stuff

[@FinancialShinanigan]

Gotta clear warehouse for 2023 items

[@magahongkong4664]

But nobody buying. Even those retailer employees are getting fired so they won't buy stuff from employers that fire them

[@bfrock01]

I fully expect this to show up soon to impact the CPI. Hopefully it happens prior to the Fed raising rates to the point of no return.

[@jayhay1237]

A concerning trend in my associated industry too: hay prices have gotten so high that most producers of meat saw the temporary spike in livestock prices and hit the exits. Unprecedented shortage of meat will be a certainty next year. Grasshopper and grubs anyone?

[@id10t98]

This goes to show you the true stupidity of the people in the C Suite and purchasing managers. When you sell 3 years worth of flour, toilet paper and other stuff in a matter of months, you have to know that sales are being pulled forward out of fear of the products not being available later and this isnt some new paradigm for consumer staples demand. The oil industry has done this to itself 4 times in my life so far, where prices for oil and gasoline have fallen 50% or more, the last time was in April of 2020 when the price of a barrel of oil went negative. Most people in the C Suite got there because they knew someone, not because they were the smartest or best person for the job.

[@manoftomorrow5987]

Facts. For sole stupid reason it seems as though CEOs when looking at their forecast for 2022 thought that 2020-2021 performances would have remained the same forever.

[@xzera1012]

Waiting on the mass sale discount for food, shelter and gas 🫠

[@MrStephenmindo]

US o America. First World Problems. Too much food(obesity). Too much money(reverse bank run).Too many jobs(labor shortage). And now too much stuff(excess inventory)

[@shmookins]

Will this mean that Black Friday deals this year will be extra good for consumers than previous Black Firdays in the past?

[@JA238979]

If you have extra cash despite inflation, I think so. That "Friday" doesn't mean anything now, and some things are more expensive during the 2-month-long Black Friday than they were sometime during the previous 3 months. That was the case last year, anyway.

[@sew_gal7340]

It wont because prices on sale are still higher than prices before inflation aka before biden took office. It's a false sense of security as you think you are getting a better deal but ironically it is still more expensive

[@johniii8147]

Black Friday Isn't such a big deal anymore. It's more about Cyber Monday

[@JA238979]

@@johniii8147 Cyber Monday is another game of perceived scarcity. That "Monday" lasts around 1 month. There is a funny KZbin video called "If Black Friday Ads Were Honest", I think, and it's pretty good.

[@ZiggyBoon]

For the longest time I refused to buy athleisure pants because I refused to believe I needed them. But then I sat around in my house for 2 years trying not to get COVID and not going to the gym, just drinking beer that all I had to do was order from my phone while watching streaming videos. And now the stretchy waistband athleisure pants are the only style that fit. And lucky me, they're all ON SALE!!

[@Mr_Phage]

Luckily in the UK it is illegal to set an artificially high price just to put it permanently on sale.

[@jayharrow12]

this is excess inventory sale, every other sale youve ever bought was marked up and then discounted to make you think your getting a better product for cheaper but its just a number.

[@HaoQuachy]

take a shot everytime you hear the bullwhip

[@tejagundala1826]

1:14 “It’s like an echocardiogram for a patient who goes into shock” - This analogy makes no sense.

[@nortonUnleashed]

Burry was tweeting about this several months ago

[@gilberttorres8]

WSJ is lagging behind the world. Customers are NOT stupid.

[@mattpatrick2564]

Two hands, the hand of the owners have given away the economic means or hand of the worker for producing products to increase shareholder wealth but did not give the worker the benefit of equity in the company. No, they removed pensions, reduced healthcare benefits, pushed households to work two and three jobs and said hey you figure out the most important financial decisions in your life (retirement investing). And, this happened under Unions and multiple politic parties.

[@bradhaughton6698]

The discount is definitely good I'm looking at few Electronics two of them being TVs 65" and 75" one is an LG and the other one is a Sony in the premium range.

[@ice9dragon]

no one asked

[@llpp202]

About a year late lol. Everyone saw this coming, deflation for junk while "inflation" occurs in food, gas, rent, etc.

[@bassfrk402]

1:15 “It’s like an echocardiogram when a patient goes into shock.” I think he meant electrocardiography (EKG) when describing the inventory-to-sales ratio. We don’t use EKGs to describe a patient going into shock

[@cherieescario6140]

I’m glad someone else picked up on this. The analogy doesn’t work at all lol

[@3hristopher]

Dominos is doing 20% when ordered online

[@alohatigers1199]

This is why I buy things online, specifically on alibaba because their price is cheaper than buying on Amazon.

[@mariceladelacruz3212]

I want to know where all these sales are because I have not seen any where I live

[@MinorityDoc]

The echocardiogram for cardiogenic shock analogy ??

[@willsalazarramirez5139]

CHICLAYO PERU 🇵🇪 🤝 WASHINGTON DC USA 🇺🇸 🇺🇸 🇺🇸 🇺🇸

[@nathanielsingleton6302]

All prices are inflated and on sale at the same time which equals the actual price you’re supposed to pay. There is no real discount. 😂😂😂

[@BoydGilbreath]

Don't look up! Too much merchandise! Cars not sold , new cars sitting on lots, price too high. But, Supply chain difficulty, shortages of everything! Better get all your Christmas stuff now! Don't look up!

[@vickyspencer2816]

The stores raise prices then put on Sale. So it's really not a Sale

[@beatjunkybg]

I hate companies that use that strategy, inflated prices that go down as a huge discount every month. You feel like e complete fool every time you pay the original price, cause it doesn NOT reflect the quality at all

[@sardarkhanwaldshahidkhan]

Everything on sale except for the PS5🤦🏻‍♂️😂

[@jaschan2006]

Bruh! Sony raised the price!!

[@carlosturciosolivera1899]

What do you expect? People are concerned about paying rent, putting food on their tables, and having medicines. Those times of changing to the newest model TV or phone every year are gone...at least for most of us.

[@shubhamgarg8951]

Shares are also on sale.

[@argh6666]

Not in Europe, nothing is on sales 😭

[@samwui94]

Things are on sale but with inflation, even things that are on sale are still more expensive than they were 3 years ago before the pandemic

[@briand5379]

Everything's on sale because it's a game retailers play to make people think they're getting a good deal when in reality they're not.

[@peterschinkai5339]

I"m rather skeptical by this WSJ story. As a personal example, two months ago, I ordered a couch from a national retailer. It still has not arrived and I cannot get an update on when to expect the couch. So, I've begun searching for a replacement couch at other furniture stores. They are all advertising "sales" on everything, but nothing is available. At one retailer, they offer 26 different options of couches, but only have 4 in stock. They also showed a "on sale" price for all 26 couches. These are not real sales, but just inducements to get you to pay the price that they're hoping to sell the product at. It's the Kohl's/JC Penny approach.

[@hamburgermatty]

This made me think about George Carlin’s joke on stuff.

[@jholid6y]

No more stimulus has nothing to do with this.

[@bobbrown8661]

"Sale Price" is just the street price, i.e. what people are willing to pay vs MSRP. Nothing new here. Also known as the Anchor price.

[@Taquitos-burritos]

Would that happen for cars as well 😂

[@cjezinne]

Economics, the social science of impracticality. Look at what happened, here’s why it happened, we don’t know what’s about to happen… but we’ll explain it to you afterwards 🙂

[@yellowmoon1084]

What sale are you talking about? I don't see anything discounted. Most of the stuff I need or want to buy is actually more expensive now.

[@yongchen4158]

Sales new stuff coming out yearly right supplies and demand thing

[@Bobbobbob984]

Doesn't this mean at least the inflation should go down at least for some consumer goods?

[@yayoudo1]

When is the final snap coming? 🤨

[@futuramanut]

Not the corporate profits!

[@Anthrillist]

So when does this start with cars

[@mclovin6537]

Cathy Woods was right

[@brokeduece1691]

What sales?... This is just an infomercial that worked!! I just couldn't afford anything

[@kunaljain8391]

most fashion clothing brands have profit margins 100 to 500% of it manufacturing cost its time that people should not fall for their scam and they pay the real price

[@hyrenaj2888]

Where are these sales everyone is talking about?

[@alexking358]

They are!?!

[@sales_coach_ai]

Don’t give up your money so easily.

[@TheWikipediaOrg]

I thought you will tell how sales are fake, either the price was boosted up before the sale, or seller straight up lie, and just put a sale sign.

[@Firestorm637]

USA printed 15 trillion dollars out of thin air past 2 years.(WW 2 cost 5 trillion) People paid to stay home but continued to buy when factories shut down. Lead to shortages/backlog to supply chain issues. Customers stored up extra catch slowly running out with inflation/recession also developing from printed dollars. Stores supply issue mirror inflation issues. USA late on increasing interest rate(2021 vs 2022)

[@Firestorm637]

USA going back to warehousing vs just in time. Hopefully more made in america stuff. Remember in the 60’s, everything Made in Japan. Now it’s Made in China. If it was not for China most Middle class people could not afford many products. Even Apple is Made in China. Look at all the Chinese ownerships in USA. In the 1970’s with oil Embargo, Japanese fuel sippers cars vs Detroits muscle cars. History repeating itself with tsunami of cheap Chinese EV’s arriving soon vs USA gas cars/high fuel costs

[@TireSpare]

okay, then i will wait further time to get my favorite clothes at fair prices

[@HT-vd4in]

The earlier the recession comes, the earlier the FED pivots. And QE and lower interest rates will unleash the economy like a spring

[@perrinpartee557]

Consumer based economy has to transition to a more sustainable model at some point

[@nabeninja5718]

There are legitimate "sales" occurring where prices are close to or below cost. Prices on good and services is one of the least "sticky" elements of a businesses revenue generation. Maintaining low prices because of excess inventory could produce a systemic effect. Overall, this video shows good use of the bullwhip effect.

[@bnyadsharef5156]

What stores are affected by this the most?

[@OneManOnFire]

Will the Xbox be on sale?

[@thedaveandjimshow3809]

It is "for sale" therefore it is "on sale"!

[@Mr.BobsDog]

Chinese saying: Endless sales, endless cons

[@kombe971]

Covid changed consumer behaviour. Ppl don’t want to spend money on clothes when they value other things now

[@jillclarke7264]

Oh No! not corporate profits and stock prices. How will the rich stay rich? 90% of us want to drive down corporate profits. The last 6 years have been out of control. Business wins while citizens suffer.

[@duran9664]

Lie lie lie from the retailers & laziness from the reporter 🤢🤮 Go to Target & BestBuy & check by yourself 😡 they raised prices like 50% then pretend that they give u 20% specie offers. 🤬🤬 I am sick of the laziness of legacy media reporters who can’t report professionally & do their f$&@ing homework.🤬

[@NotaLoca12341]

So, buying a TV now is cheaper? 🤔

[@phucyouse5316]

Businesses do not spend their own money #stihlcustis getttting warmer

[@TheFroThunder]

Which retail stores are having major sales now?

[@magahongkong4664]

Revlon. It is getting liquidated :)

[@perrinpartee557]

I could live in gym shorts and flip flops for the rest of my life and be just as happy as I would buying new outfits on sale.

[@htconexify]

Now if only food could go lower.

[@davidcantor293]

They they calling it a recession during covid?

[@jeannekohlbush3323]

Is this going to happen with new cars?

[@niro750]

WSJ explains what burry warned about weeks and weeks ago on twitter

[@Deadnature]

Taleb called it

[@hugochan2821]

And ps5, apple preproduction increases price,because they can. This is the market, where cooperate just manipulate us as they want.

[@GandlesSandles]

Dont think this guy knows what an echocardiogram is

[@4spremilimone]

Dont buy anything….these corporations need to fret…keep your money for food, shelter & gas…You probably have more than you need already

[@TheFalloutShot96]

Except for gas food and rent…..

[@weinerdad]

No, nothing is “on sale.” More expensive than ever.

[@astrah982]

Everything's on sale except for food rent water and taxes