What is a common consequence of overbuying merchandise?

When retailers overbuy merchandise, one of the most significant consequences is the increase in inventory carrying costs. Carrying costs encompass various expenses associated with holding unsold goods in stock, including storage fees, insurance, obsolescence, shrinkage (loss from theft or damage), and capital costs associated with the investment in inventory.

As inventory levels rise due to overbuying, these costs can escalate quickly, reducing overall profitability. For example, if a retailer has excess stock that doesn't sell, they not only incur the initial purchase cost but also ongoing costs to maintain that stock. This situation can lead to cash flow issues as funds are tied up in inventory rather than available for other operational needs.

In contrast, while overbuying might seem initially beneficial in capturing sales, it often leads to decreased overall sales performance, especially as discounts may need to be offered to clear out excess inventory. Thus, option B rightly identifies a critical downside of overbuying in retail environments.