Economy
02 May 2022
As prices rise, shoppers keep spending
The latest consumer and company data shows that sales are growing, despite inflation.

Inflation isn't slowing spending. (Photo via Pixabay)
The latest consumer and company data shows that sales are growing, despite inflation.
Inflation isn't slowing spending. (Photo via Pixabay)
Inflation is rising, yet consumer demand remains strong.
That was the early message delivered by retail sales data recapping March 2022.
With more data now available from additional metrics and earnings reports from public companies, that conclusion appears to be playing out around the economic landscape.
Here’s a look at the latest data:
The Personal Consumption Expenditure (PCE) rose 6.6% in March over the year period that ended in March, according to data released April 29 by the Bureau of Economic Analysis. This was the highest rate increase since the period ended January 1982, topping February’s uptick of 6.4%, CNN reported.
When removing food and energy costs, the increase for March 5.3%, which is down slightly from 5.2% in February.
The PCE, which is a measure of the value of goods and services purchased in the United States, is one of the tools used by the federal government to gauge inflation. It is watched closely by the Federal Reserve as it sets monetary policy.
This week, all economic eyes will be on the Fed as it decides whether to follow through on an expected interest rate hike of .5% at its meeting on Wednesday. (Economists think they will).
With retail sales up 6.9% year-over-year in March, however, there were signs that price increases weren’t leading shoppers to immediately pull back. Recent earnings reports from some of the largest CPG companies confirmed this.
Procter & Gamble reported its highest sales growth in 15 years, per Reuters. Its fabric and home care unit was up 7%, while sales in its healthcare business grew 13%.
Unilever, which makes grocery and personal care items, reported that sales were up 7.3% in the first quarter. This came as it raised prices by over 8% as it offset supply chain and energy costs.
Nestlé, the food and beverage giant, reported a 5.4% increase in total sales. This came after it raised prices by 5%, and said more hikes were likely to come.
“We stepped up pricing in a responsible manner and saw sustained consumer demand,” CEO Mark Schneider said in a statement. “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”
At confectionary maker Hershey, sales were up 16.1% in the first quarter, according to its earnings report. CEO Michele Buck said Easter season was especially strong for the company.
“Consumer demand for our products has remained resilient across categories and markets, despite rising inflation,” Buck told investors.
Even for Amazon, which reported its first quarterly loss since 2015 while detailing a number of cost challenges, there were no signs of consumer "softness," CFO Brian Olsavsky said on a conference call with analysts. He added that Amazon believes its selection and convenience stands out, and it will continue to work on shopper experience as it tracks how the inflationary environment influences available household income.
In one sign of optimism for the near future, The University of Michigan Index of Consumer Sentiment recorded a month-over-month increase of 9.8% in April.
This was mainly the result of optimism for the near future. There was a 21.6% increase in a measure of the year-ahead outlook of the economy.
While there was an improvement over the last month, the University of Michigan points out that the sentiment over the last two months was still lower than any other month in the last decade.
Even with the sales growth in the first quarter, it remains a volatile economic environment. Longtime University of Michigan Surveys of Consumers Director Richard Curtin offered the following analysis:
“The downward slide in confidence represents the impact of uncertainty, which began with the pandemic and was reinforced by cross-currents, including the negative impact of inflation and higher interest rates, and the positive impact of a persistently strong labor market and rising wages. The global economy has added even more uncertainties about prospects for the U.S. economy, including the growing involvement in the military support for Ukraine, and renewed supply line disruptions from the covid crisis in China. Who would not be apprehensive about future conditions, even if on balance they anticipated a continued expansion?”
Whether that leads to what Curtin calls a “tipping point” for consumers, including a pullback in spending, remains to be seen. Leaders of consumer goods companies are watching closely.
Accurate inventory is now essential for Amazon FBA sellers, writes Emplicit's Evan Sherman.
Amazon used to be a lot more laissez faire about how Fulfilled By Amazon (FBA) sellers used their fulfillment centers. Sellers could send in inventory, and, while the space wasn’t unlimited, if their sales were not as forecasted they would simply pay long-term storage fees. Sure, if a seller’s inventory management was poor enough they would have their inventory storage limits reduced and pay higher storage fees, but this was just an incentive not to let things slide too much.
However, in 2022 Amazon reduced storage limits overall to the point where some FBA sellers had sales and catalog size impacted, and in March 2023 Amazon revised their inventory system. There is now an incentive for FBA sellers to be highly accurate with inventory management because Amazon will reward them with increased storage limits. Precision is a carrot now, rather than a stick.
In this article, we provide five strategic methods that sellers can utilize to optimize inventory management on Amazon.
Achieving successful inventory management on Amazon requires a profound understanding of past demand patterns and the capacity to accurately forecast future demand. Seasonality, market trends, historical sales figures, competitor activity and planned promotions all play a crucial role in determining the trajectory of sales.
At Emplicit, we advocate for the analysis of multiple historical data points, encompassing previous 7, 30, 60, and 90-day sales figures. Our logistics experts factor in internal factors such as stock availability, marketing spend, promotions, and sales and margin targets, and external factors such as seasonality, Amazon trends, new category restrictions and market entrants. A comprehensive review of shipments in working, shipped, or receiving status is also beneficial. Striking a balance between what has been sold, what is available, and what's en route to an Amazon fulfillment center is key to precise forecasting.
Inventory management isn’t a static task; it requires constant vigilance and flexibility. FBA sellers should regularly review and modify their demand forecasts, adjust their replenishment suggestions based on demand shifts, and update their minimum reorder points as required.
Sellers should review sales daily, plan replenishment frequencies to suit their needs, and maintain appropriate inventory levels at Amazon. Weekly replenishments can help keep a seller’s inbound pipeline full, minimize out-of-stock instances, and account for unforeseen supply chain disruptions.
Amazon’s organic and paid algorithms prioritize products with high sell-through rates. This means best selling products end up selling better. Focusing on high-performing items allows FBA sellers to reduce monthly storage costs, avoid aged inventory and the associated fees that Amazon imposes, and curtail the need for costly removal orders. And sales velocity is the quickest way to get Amazon to increase your storage limits. Concentrate on the 20% of items that generate 80% of sales.
At the same time, sellers should prune their catalogs by removing slow-selling items. These items negatively affect Amazon’s Inventory Performance Index (IPI) score, which directly influences the space Amazon allocates to a seller’s inventory in their fulfillment centers.
If sellers are tight on inventory space, as well as the best-selling products, they should prioritize products with higher margins until Amazon provides additional storage, and they should reduce marketing spend accordingly – something which necessitates a close relationship between inventory and marketing.
Ranking products by sales and margins, and calculating the storage space each product takes up will go a long way towards understanding and anticipating demand on Amazon.
Amazon’s capacity management system is a new system for allocating inventory limits to FBA sellers and allowing sellers to gauge their inventory capacity at Amazon’s fulfillment centers. It also enables sellers to bid on increases to their inventory limits.
Previously, Amazon had restock limits which were updated weekly based on the seller’s previous 90-day sales. Restock limits were determined by Inventory Performance Index (IPI) metrics such as sell-through, excess inventory, and stranded inventory. However, because the restock limits were updated weekly, it was challenging to plan accordingly, especially heading into a peak season or if a seller was about to run a promotion.
With Amazon’s Capacity Monitor program, sellers are given a monthly capacity outlook based on the cubic feet of space occupied by their products in Amazon’s fulfillment centers and their IPI metrics. Amazon not only provides a current month outlook on available space; they provide an estimate for the next three months which can aid in the inventory planning process.
To take advantage of the new system, it’s imperative FBA sellers understand their product's physical footprint in relation to the allotted space Amazon provides (Amazon does still provide unit estimates). Knowing a product’s cubic feet and the product tier designation allows for effective planning of inventory replenishment. Exceeding space limits means overage fees from Amazon, however, if a seller knows they have a peak in sales coming up they can bid for additional capacity (in cubic feet). However, selling-through this additional inventory means Amazon waives those fees, so it’s a win-win.
At Emplicit, we have seen the capacity monitor program benefit our clients, with many clients seeing an increase in the amount of inventory they can ship in – likely due to healthy sell-through velocity and other IPI metrics. The program has fundamentally changed the way we approach managing our inventory on Amazon, so everything sellers do regarding inventory planning should be within the context of Amazon’s capacity monitor program.
Smart sellers should already be considering the impact of their product packaging on their FBA fulfillment fees. If the actual product size allows, sellers can generate significant savings by reducing the size of their packaging. Amazon’s Small Standard rates are 15-20% cheaper than Large Standard rates depending on weight, and Amazon’s Small & Light rates are 15-27% cheaper still than Small Standard rates. However, fulfillment cost savings are not the only reason to reduce packaging size, smaller packaging can significantly increase Amazon inventory cost-efficiencies.
With Amazon’s capacity management system providing inventory space based on cubic feet rather than number of units, the space each product takes up is now more important than ever. While larger packaging sizes can sometimes improve sales in brick and mortar retail, sellers should consider developing smaller Amazon-only packaging. This will not only reduce fulfillment costs, but allow more units to be stored in the same inventory space. The combined savings can more than offset the cost of a redesign and second packaging print run.
Additionally, smaller packaging may qualify sellers for Amazon’s Compact By Design badge. This helps brands stand out, and increases click-throughs and conversions. (We suspect there are algorithm tweaks for brands with certain badges too, but it’s difficult to prove.) Amazon-specific packaging can help with Transparency (anti-counterfeiters) and help combat unauthorized resellers.
While it might seem like a significant investment and not something the inventory team typically gets involved with, reducing packaging size is a long-term way for FBA sellers to optimize inventory management.
Amazon Global Logistics (AGL) offers a streamlined solution for sellers whose products are manufactured in China. AGL eliminates the need to use freight forwarders who would usually receive a shipment from China, then split up that shipment and forward on to multiple Amazon fulfillment centers per the standard FBA process. Instead, sellers can book shipments directly with Amazon, complete the necessary export/import documentation, and ship directly to US, UK or European fulfillment centers – sending the entire shipment to a single fulfillment center.
If leveraged properly, AGL can save sellers thousands of dollars in warehouse and 3PL fees and reduce the need for inventory to be processed multiple times before it arrives at Amazon’s fulfillment center, meaning inventory gets where it needs to be quicker.
AGL offers two shipping options – Standard Ocean Freight and Fast Ocean Freight – with the standard option giving sellers the opportunity to either ship via a full container load (FCL) or less than container load (LCL). Shipping partial container loads with Amazon doesn’t slow shipments down versus other carriers because of Amazon’s scale. Amazon’s economies of scale mean that AGL can offer shipping prices from mainland China and Hong Kong that most sellers are unable to match. And Amazon’s expert customs brokers get products cleared through customs quickly because Amazon has a vested interest in shortening the time to market.
This one-step international shipping direct to Amazon was actually something we pioneered before the advent of this service from AGL – working with our client Shapermint and their manufacturers in China and logistics team to ensure packaging and shipments were FBA compliant. However, now AGL offers this service, it’s an even easier solution to a common challenge. We suspect AGL will roll out in other international manufacturing markets, but Amazon is tight-lipped for now.
Amazon inventory management is complex and needs constant attention. Sellers can hire a fractional inventory specialist because this is not something that should be trusted to an Amazon generalist. If sellers get inventory right, it will keep pace with sales. But if they get it wrong, their inventory can become the main thing holding them back.
Evan Sherman is the director of logistics at Emplicit.