The Walmart, Target inventory misses include a message for Main

The retail battle narrative over the past few decades has cited one of two wars: Amazon and e-commerce against the big bricks-and-mortar retailers, and everybody big against small Main Street entrepreneurs. But in the current confusing economic environment — marked by inflation, supply chain bottlenecks and a volatile consumer changing spending patterns due to the high prices which followed Covid — small business experts say that Main Street should be more optimistic about the advantages of being small.

The inventory builds and subsequent markdowns from the biggest retailers, including Walmart and Target, show that even the best can get this consumer economy wrong. In fact, small business owners, being closer to relationships on both the supply and customer ends, may be able to more nimbly manage a fast-changing environment.

That’s the advice from Nada Sanders, Northeastern University distinguished professor of supply chain management. She told CNBC’s Small Business Playbook virtual summit on Wednesday that she has been “gloom and doom” in the past, but is now optimistic about Main Street’s chances in the current economy.

“I actually see this as a tremendous opportunity. I really do. Especially for small businesses,” Sanders said.

She cites three areas where entrepreneurs should be focused, and the first is directly related to the big box retailer woes: forecasting.

“The big companies are really struggling with that,” Sanders, who is an academic expert on forecasting, said. “We see it, obviously, with the retailers. Walmart, Target.”

Talk directly to customers to understand shifting consumer demand

Her opinion is that the biggest companies have become too reliant on inventory algorithms to forecast data, but in the current economy, which has defied many historical patterns, “historical data in this space right now isn’t really good data. It’s not clean data, it doesn’t indicate the future that is very volatile,” she said.

This gives small business owners who can connect directly with customers, to understand what their needs are, a potential advantage that can’t be calculated by an algorithm.

Whether a small business is B2B or B2C, Sanders said direct communication is a “real answer” for them right now in dealing with changing consumer behavior.

“What I’m seeing with the big companies, they’re trying to hire futurists and trying to figure out ways to actually predict demand. But every time we look at the numbers, the Consumer Price Index, all of it, we’re looking backwards,” Sanders said. “The fact of the matter is, we’re in a very quickly changing landscape and I think we have to look forward. Small business owners really need to connect and use judgment to forecast and to understand what their customers need.”

“As a small business owner on a tight budget … you don’t even need the really heavy duty AI, which I think a lot of small business owners, they get a little bit nervous. … You can…