unsold item management, fashion industry headache

The time has come for the fashion sector to take stock, especially the winter 2022 sale. The least we can say is that it is very negative. Neither the private sale nor the second price cut really attracted consumers.

Blame inflation, rising energy prices, coronavirus fears and health measures. So in January (usually the 2and month of activity), clothing brands saw in-store sales fall by 23.7% compared to January 2019.

A situation that the Trade Alliance finds very concerning as it threatens the financial health of companies and their cash flow plan. In addition to the legitimate question of the survival of companies in this sector is the question of the management of unsold goods.

A study by the Syndicate of Independents and VSEs shows that, in light of the disastrous results of winter sales in 2022, 76% of traders (all sectors combined) are calling for support for unsold stocks to be restored.

At the same time on 1 . the Anti-Waste Act for a Circular Economy, promulgated in February 2020, entered into forceer January 2022: It requires, among others, the fashion and luxury industries to donate, reuse, reuse or recycle their unsold items.

Shock at the destruction of unsold goods

While the issue of the cost of inventories is critical for small traders who, for obvious survival reasons, want to preserve their inventories, the trading giants nevertheless resort to other not very responsible practices, most notably destruction.

In the fashion industry, two companies are often mentioned when discussing this practice. For example, in 2017, the giant H&M was accused of burning 12 tons of unsold clothes a year since 2013. The luxury company Burberry was singled out for burning the equivalent of 31 million euros of unsold euros (clothing and cosmetics) in the same year.

This practice has sparked the excitement of the general public and poses a real ethical problem. On the one hand, by wasting products that have mobilized natural resources. In contrast, for many, destroy products from global value chains known for contributing to recurring environmental and social problems.

A sector with already controversial practices

The so-called fast fashion (or fast fashion) is already associated with the waste of resources caused by the rapid renewal of collections, with serious accidents in garment factories in developing countries (such as the case of Rana Plaza in Bangladesh), but also with the use of components that are harmful to the health of the consumer and the environment. For example, before being accused of destroying its unsold items, H&M was criticized for the use of chemicals and pollutants in its clothing.

The luxury sector is no better. In particular, our work has raised the issue of animal welfare. The destruction of products that use rare animal raw materials or of animals that have been killed only for their skin, such as the crocodile, seems difficult to justify.

The management of unsold goods in the fashion sector is not new. While some companies have chosen to incinerate them, others have decided to sell their products to stock buyers at a loss, as Zara does in Senegal.

Some companies have donated part of their unsold products to associations. We can take the example of the Camaïeu brand, which donates some of its pieces to associations such as the Red Cross or Solidarité Femmes Accueil.

The unsold, hobbyhorse of luxury

These initiatives can only partially solve the problem of unsold items and seem unsuitable for the luxury sector. Selling or donating the other parts, in the case of companies in this sector, amounts to questioning one of the most important values, namely exclusivity. Recycling, in turn, does not seem to appeal to consumers.

The research we conducted has shown that the integration of this practice at Hermès has been approved by consumers who are reluctant to use recycled fabrics in luxury clothing. If private sales can be a solution to sell inventories, it seems crucial for the luxury sector to return to one of its foundations, which is limited production.

One of our recent studies on the subject confirms the importance of luxury consumers’ desire for unique products. By cultivating rarity, it becomes possible not only to enhance the prestige of luxury, but also to avoid unsold items and respond to the issue of sustainability upstream, i.e. at the production level.

The words of one of the respondents in the context of our various surveys go in this direction:

“I would even say that luxury should not be democratized. Not that it is not good that it is accessible to those with limited resources, but in order to remain compatible with sustainable development, luxury must maintain a certain inaccessibility. †

New technologies and unsold inventory management

In the case of accessible fashion, Zara has found quite an effective inventory management model. Thanks to the strong integration and coordination between two essential functions of its value chain (the production and design function and the commercial function), the company manages to follow trends by staying as close as possible to consumer preferences, thus reducing unsold volumes to limit .

This strong coordination is made possible by a good technological infrastructure (technology RFIDthe clouds and the big data† For example, thanks to its smart labels (RFID), Zara is one of the few brands in the fashion sector that managed to empty most of its stocks in 2021, despite the lockdowns.

The issue of unsold items, accentuated by the coronavirus crisis, is a reminder, if necessary, of the need for the fashion industry to rethink its development model.

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