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Retailers Flock to Donation Services to Offload Unsold Inventory

How did we get here?
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Francis Scialabba

less than 3 min read

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.

Months after the pandemic slowed retail to a standstill, brands are still struggling to move mountains of unsold inventory. Like the unfolded laundry pile staring at me as I write today, this mess has layers.

The backstory: Retailers ended up with 525,600 minidresses largely because inventory forecasts didn’t predict the pandemic. And retailers often produce more than they can sell.

  • A broken fashion system made the inventory crisis worse for designer brands, the NYT Magazine writes. Brands that partnered with department stores often created “novelty” or “exclusive” items for each wholesale account they opened.
  • Those items appeased corporate buyers...but shoppers didn't bite.

The temporary solution: Brands are flocking to donation services to offload the goods they haven’t sold this summer, the WSJ reports.

  • Clothing donation firm Good360 expects to receive $660+ million in retailers’ unsold clothes by the end of 2020. That’s 2x the donations it received last year.
  • Gap alone has donated $60+ million of unworn apparel during the pandemic.

It’s a charitable choice, but it’s also to circumvent a controversial alternative: destroying inventory. A famous example? Burberry’s 2018 admission that it burned $37 million of unsold goods.

Shoppers and government agencies in some markets have stepped in to demand cleaner practices, but they’re not uniformly enforced across nations or even within large companies.

  • LVMH has started partnering with a recycling company to process merchandise it can’t sell, but only for 11 of its 75 brands. Of those, some items are still destroyed.
  • Amazon has started donation programs for merchants in the U.S. and France with unsold merchandise, but Amazon still destroys some unsold inventory in the U.S.

Another alternative: If retailers can’t get their orders in order, they can also sell inventory to off-price retailers like T.J. Maxx. But concerns about diluting their brands’ value makes this option less attractive.

My takeaway: If retailers only produced what their customers truly wanted, the inventory glut would shrink. Now that the pandemic’s revealed the worst-case scenario for excess inventory, some brands may be convinced to create smaller batches at the outset.

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.