Market Analysis
Part of Retail supply and stock trends
Comparing high inventory with actual overstock
Compare stock quantities, the selling window and likely proceeds before describing high retail inventory as overstock.
High inventory is a stock level measured against a chosen comparison. Overstock means the quantity exceeds what the retailer can reasonably sell or use within its intended selling period, given expected demand and available exit options. Telling the two apart requires product-level quantities and a realistic route to sale, not an aggregate inventory figure alone.
Identify what is high
Inventory can be measured in dollars, units or weeks of cover. These measures can move differently. Book value may rise without a matching rise in units; weeks of cover may rise because expected sales fall. Name the measure, period and comparison before judging the stock position.
The ABS Business Indicators, Australia series includes estimates of the book value of inventories for selected industries. An industry-level book value measure cannot show whether a retailer has too many winter jackets, the wrong shoe sizes or stock in the wrong store. The methodology also notes that inventories data are not collected from every business included in the survey.
Inventory Metrics from ABS Business Indicators, Australia (Jun 2026)
- Industry-Level Book Value of Inventories
- Not available for all businesses; estimates only
- Data Collection Coverage
- Not every business in the survey contributes data
- Valuation Method
- Based on cost or net realisable value as per AASB 102
Pros and Cons of Using Aggregate Inventory Figures
- Pros
- Provides broad trend insights across industries
- Cons
- Cannot identify product-specific overstock (e.g., wrong sizes, obsolete items)
- Pros
- Helps track overall inventory trends over time
- Cons
- May mask stock imbalances at store or SKU level
Test the route to sale
Review each product or closely related group against:
- Sellable units on hand, including units already committed to customers.
- Incoming units and realistic receipt dates, taking account of orders that can be changed or cancelled.
- Expected demand before the selling window closes, allowing for periods when the product was unavailable.
- The likely selling price, selling costs and options for any remainder, such as returns or clearance.
A seasonal stock build may be deliberate and supported by demand. A small holding may still be excessive if it is obsolete or cannot reach the customers who want it.
Observation / Next question
- Inventory value rose
- Did quantities, costs or product mix change?
- Weeks of cover rose
- Did stock increase, expected sales fall, or both?
- Clearance began
- Was it planned, or did ordinary sales lag?
- A write-down appeared
- Which goods and reporting period does it concern?
Keep the accounting test separate
For inventories within its measurement scope, Australian Accounting Standard AASB 102 requires the lower of cost and net realisable value. Net realisable value is the estimated ordinary selling price less costs to complete and make the sale.
A write-down can indicate that expected recovery has fallen. Its absence does not establish that the retailer holds an appropriate quantity: surplus units may still be carried at cost if their expected net proceeds support that value.
A sound conclusion names the products, remaining selling period and assumed route to sale. If these are unknown, describe inventory as elevated under the chosen measure; overstock has not yet been established.
