Lean inventories, faster delivery: Retail's next move

Inventory trends to watch in 2027 

Retail inventory dollars are expected to grow by less than 5% in 2027. However, even a small per cent change equates to billions of dollars of additional inventory investment. Here’s what retailers and retail suppliers need to know:

Key numbers

• 2027 inventory growth adds to a June 2026 baseline of $832.6 billion. A significant portion will come from higher merchandise costs rather than increased volume. 
• The retail inventory-to-sales ratio for June 2026 was 1.25, down from 1.31 in early 2025, as sales growth has risen at a faster pace than inventories. July numbers are expected in mid-September.
• June 2026 economic indicators from the Federal Reserve estimate a 2.3% GDP growth in 2027. For retailers, this is consistent with a slight expansion but not a surge in demand. 

Behind the trends

• Consumer spending growth is disproportionately flowing toward services. 
• Retail inventories are also affected by the K-shaped economy. High-income households are purchasing very differently than the lower-income ones.
• For food and beverage retailers, the pervasiveness of GLP-1 medications for weight loss is bringing a decline in total food consumption and purchasing for these households. Categories such as snack foods, desserts, candy and sodas are declining, while fresh whole foods and foods with protein are showing growth. 
• During the second quarter of 2026, online sales accounted for 17.1% of total U.S. retail sales, consistent with the first quarter.
• Continued tariff changes may result in retailers pulling forward inventory and producing temporary import and truckload surges followed by slower periods.

What retailers and retail suppliers should consider

• The industry has been in a passive destocking cycle since the summer of 2025. Retailers are expected to enter 2027 with lean inventory positions. As a result, retail suppliers should consider replenishment in smaller amounts more frequently delivered and more precisely placed.
• In the K-shaped economy, premium goods, health and beauty may merit additional inventory while value apparel and discretionary categories need to be more tightly managed.
• AI-assisted inventory management, item-level visibility and smart warehousing strategies can help retailers improve product availability without returning to historical inventory buffers.
• For Canadian and U.S. goods subject to recently announced tariffs, remember that trade negotiations often involve periods when both sides take steps to strengthen their positions. Plan for multiple scenarios as talks continue rather than making hasty sourcing decisions based on current state.
• Evaluate your reverse logistics strategy well ahead of post-holiday returns in order to maximise inventory that can be repaired, refurbished, resold or liquidated.

Keeping up with higher home delivery expectations 

Consumer expectations for online shopping deliveries have changed significantly, mainly driven by Amazon’s vast network. Consumers now expect almost anything they order to arrive within two days. For most, a week-long wait is now too long.

Who’s setting the pace

• Amazon delivers approximately 60% of eligible Prime orders in the top 60 metro areas the same day, with a stated on-time delivery rate of over 95%. 
• Home Depot announced in mid-August that it now offers nationwide express delivery for eligible items in three hours or less, for a maximum rate of $10 depending on location, no membership required. In addition to Home Depot’s supply chain network, its more than 2,000 U.S. shops serve as local fulfilment hubs. 
• On a recent earnings call, Home Depot announced that the majority of these expedited deliveries are completed in less than one hour. Over the last 18 months, the chain has cut delivery lead times in the United States by 45%. 
• Additionally, Home Depot now delivers approximately 55% of its large and bulky orders within two days. 

What other shippers should consider

The competitive advantage is shifting from simply having inventory to having the right inventory in the right place at the right time. Retailers that combine localised fulfilment, top-notch visibility and flexible transportation will be best positioned to meet rising delivery expectations.

• Position inventory closer to demand. Use shops, forward stocking locations and regional fulfilment nodes to support faster service levels.
• Prepare for more frequent, smaller replenishment cycles. Faster delivery models require inventory placement to be closely aligned with demand patterns.
• Improve inventory visibility and accuracy. Real-time inventory data is crucial when fulfilling orders fast from multiple locations and to quickly shift inventory from where it’s less popular to where it’s selling more briskly.
• Build flexible fulfilment options. Combine ship-from-store, curbside pickup and local delivery networks.
• Segment products by delivery urgency. Prioritise rapid fulfilment for high-demand and emergency-purchase categories.

Tariff updates

• New U.S. tariffs on select Canadian goods went into effect 22 August and Canadian retaliatory tariffs are slated to begin 8 September, but the measures are targeted and affect a relatively small share of overall cross-border trade. The $20 billion in targeted American goods represents only about 5% of Canada’s U.S.-bound exports and the retaliatory tariffs similarly cover $20 billion in U.S. goods. For now, North American supply chains remain highly interconnected, though businesses should identify exposure to tariff-sensitive products and prepare contingency plans if negotiations over the U.S.-Mexico-Canada Agreement deteriorate.
• U.S. Customs has delayed the final phase of tariff refunds.
• A crackdown on using transshipping to evade U.S. tariffs has been announced.

For more, go to the Trade Policy & Customs section of this report.

Table of Contents