Five Below’s Squishmallow Surplus: How Inflation Affected Retail Sales and the Importance of Adapting Strategies in Economic Uncertainty

In 2022, a London store displayed Squishmallows for sale. However, the sales were lower than expected due to an overstock of these popular soft toys. Five Below, a retailer, experienced a decrease in sales because of this surplus inventory.

Five Below had been holding onto its Squishmallow inventory since their launch in 2017 when they were likened to “Gen Z’s Beanie Babies.” However, the trend has shifted, and Five Below is now facing the consequences of holding outdated inventory.

The CEO of Five Below, Joel Anderson, acknowledged that inflation has impacted consumer behavior and led to more intentional spending choices. Shares of the retailer have fallen by 38% year-to-date, reflecting the challenges faced by low-cost retailers in the current economic landscape.

Despite earlier optimism about Squishmallows being a strong performer for Five Below in 2022, the rise in the cost of living has affected both Five Below and its competitors. Other low-cost retailers are also experiencing a slowdown in buying non-essential items due to higher expenses and lower personal savings rates. Fast food chains like McDonald’s, Burger King, and Wendy’s have introduced budget-friendly meal options to attract price-conscious consumers who are cutting back on discretionary spending.

In response to the challenges faced by customers who are prioritizing essentials like food and drinks over discretionary items like Squishmallows, Five Below is shifting its focus towards offering more affordable options that meet customers’ needs without sacrificing quality. The company plans to streamline its inventory management system and reduce its reliance on non-essential items while still providing value for money.

The shift away from non-essential items reflects changing consumer behavior driven by inflation and economic uncertainty. With more people facing financial strain in their daily lives, companies need to adapt their strategies accordingly if they want to remain competitive in today’s marketplace.

In conclusion, while Squishmallows may have been popular among customers earlier this year, they are no longer as attractive as essential items like food and drinks when it comes to budgeting during times of inflation or economic downturn. Companies like Five Below need to be flexible enough to pivot their strategies when necessary if they want to continue thriving in today’s fast-changing marketplace.