What Exactly Is Inflation?

inventory reduction selling closeouts getting rid of inventory

Inflation is the rate at which the price of goods and services increases. As a result of inflation, the purchasing power (value) of money decreases over time. Wholesale closeouts and liquidation stock retain more value when there is inflation; overstock buyers and liquidators can get more for these products in this environment. Inflation affects the prices of everything around us. Generally speaking, inflation can be caused by a number of factors. The recent surge in inflation has been driven, at least in part, by supply chain issues, pent-up consumer demand and economic stimulus from the pandemic. Many business have been unable to endure the stress of the pandemic and they are either liquidating stock to closeout brokers or shutting down warehouses due to high storage costs.

One commonly used inflation metric is the consumer price index, or CPI , calculated by the U.S. Bureau of Labor Statistics. Wholesale closeouts and bulk inventory is measured as part of this index. The bureau measures CPI by monitoring the average change in prices paid for a variety of goods and services, classified by eight groups: food, housing, apparel, medical care, recreation, transportation, education and communication, and other goods and services. Overstock buyers specialize in selling excess inventory that builds up in warehouses and must be liquidated to make room for new products. When looking for liquidation companies, it is easiest to do an online search for terms like these: shutting down warehouse, closeouts, closeout websites, companies that liquidate inventory, closing Amazon business and overstock.

There are other metrics that tell us about the inflation story, such as the personal consumption expenditures price index. PCE is calculated by the U.S. Bureau of Economic Analysis, which also prices a different basket of goods and services from the CPI basket. You might hear of inflation described as headline or core. Headline inflation measures total inflation for a certain time period. Core inflation attempts to pinpoint a more accurate read on inflation by excluding food and energy prices, which can fluctuate widely on a daily basis. As food prices, gasoline prices and consumer goods costs increase, the average consumer looks for cheaper prices and better values to stretch their dollars. Discount stores and dollar stores often do well during these times because they offer consumers more for their money. These stores buy overstock inventory and closeouts from companies that are shutting down 3PL warehouses, cleaning out their warehouse, or liquidating inventory to raise cash. Wholesale closeouts are more appealing when times get tough, and liquidators or overstock buyers have more value in the marketplace because they offer retailers cheaper goods at higher margins.

The impact of inflation is felt throughout an economy. As prices rise, what you can buy now will lessen over time. Being able to combat, or at least keep up with, inflation and sustain the purchasing power of your money is one of the main reasons to invest your money. Consumers care about inflation because it affects closeout costs and their standard of living. Closeout businesses and overstock liquidators carefully watch the price of raw materials that go into their products, as well as what wages they need to pay their employees. Inflation affects taxes, government spending and programs, the level of interest rates and more. Business often find shutting down warehouses and closing 3PL warehouses is a great way to reduce overhead and save money. By downsizing warehouses, they make room for new products coming and it helps them get rid of the old inventory and dead stock.

A low, steady or predictable level of inflation is considered positive for an economy. It signals growth and healthy demand for goods and services. Every company has closeouts and slow moving inventory to get rid of through the year. Sometimes when merchandise builds up and it takes up too much room in the warehouse it really needs to be disposed of any cost just to make space for new merchandise. There are closeout brokers who do nothing except buy up this kind of inventory. They will buy your closeouts and excess inventory at a discount and resell it to closeout buyers at a deep discount. As businesses generate more goods and services to keep up with demand, they need to hire more workers, which generally leads to higher employment and wage growth. Those workers then purchase things they need and want, and the cycle continues. However, when inflation gets too high or too low, it becomes dangerous because it’s hard to keep supply and demand, along with economic growth, in check. Too much inventory leads to slow sales and poor cash flow. This may create a need to liquidate stock and have an inventory warehouse sale.

This brings us to the importance of investing. Although you’ll earn interest from the bank on money in your savings account, the interest rate you receive usually won't match or even come close to beating the inflation rate. That’s why it makes sense to invest your money, if you can afford to, and grow that money’s value over time. That way, you can buy the same amount of goods and services in the future. When creating a plan to reach your financial goals, it’s important to bake in a realistic inflation rate for future expenses so you’re saving enough to meet your needs. Excess inventory is possibly the worst way to invest your money. Dead stock sits in the warehouse accumulating dust, and it has to be sold to liquidation buyers for pennies on the dollar.

The way inflation is measured depends on the gauge. For consumers, the most important price tracker tends to be the Labor Department’s consumer price index. Policymakers at the Federal Reserve, however, closely follow the Department of Commerce’s personal consumption expenditures index. The indexes are broadly similar and track the same trend, though the consumer price index tends to show higher inflation over time. Companies that liquidate inventory often specialize in buying housewares closeouts, overstock sporting goods and excess inventory of lawn and garden products or other surplus stock.

It's been decades since the U.S. faced significant inflation rates, and financial advisors worry that years of small, steady increases may have left consumers unprepared for today's extended inflationary environment. In May 2020, the consumer price index dipped to 0.1% before quickly rising over the following nearly two years and prompting the Federal Reserve to raise interest rates in March 2022 in an attempt to temper inflation and rising prices. Consumers got used to buying cheap closeouts and overstock merchandise at low prices because there has been so many containers coming into the country. But as inflation charges ahead and the cost of goods increase, businesses may be forced to shut down warehouses and liquidate excess inventory. Consumers have lived with higher prices for months with no end in sight, and they'll now have to begin absorbing the first of seven possible interest rate hikes this year. Taking steps to hedge against inflation and prepare for higher interest rates should be part of everyone's financial plan, whether inflation cools off or continues to ramp up in the coming months.

Over the last century, average annual inflation in the U.S. has ranged from upwards of 10% to lows of -10%. Ideally, the Federal Reserve aims to reach a target inflation rate of 2% to 3% in the long term. This rate represents a balance between inflation that is too high, causing a burden on families seeking to purchase essentials such as food and gasoline, and inflation that is too low, which can weaken the economy. Businesses that specialize in buying closeouts often attend trade shows looking for surplus inventory or slow selling products so they can purchase them at cheap prices. Sometimes, if a company changes their packaging or stops selling a line of products, they are willing to get rid of it just to make more room in the warehouse for new products. The Federal Reserve has some levers to pull that can cause or temper inflation. In today's high inflationary environment, raising interest rates can make it more expensive for consumers and businesses to borrow for large purchases like real estate, thus reducing market demand – a sort of brake pedal.

On the reverse, government agencies may attempt to stimulate the economy during periods of low inflation or recession by sending an influx of cash to consumers in the form of checks or rebates – a sort of gas pedal.

Merchandise USA buys closeout and overstock inventory from importers and wholesalers. We purchase closeout home décor, closeout toys, and any liquidation inventory of sporting goods, lawn and garden products, or other consumer products. If you are downsizing your warehouse or shutting down a 3PL warehouse we can help buy purchasing your entire inventory in one fell swoop.