What can clothing retailers do with all that excess inventory?
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Because of COVID-19, clothing sales are way down, leaving retailers with a glut of items that didn’t sell in spring and summer.
What to do about all the inventory? There are not a lot of good options. Retailers might try to pass the problem off to somebody else — meaning, return the clothes to their suppliers.
Lauren Beitelspacher, who teaches marketing at Babson College, said department stores, for instance, will often negotiate terms about excess inventory in their contracts with suppliers. These contracts mandate that you will give me advertising money, you will allow me to discount it or you’ll take the inventory back, she said.
Another option: Hold onto the clothes.
“It’s called the pack-and-hold strategy. They just pack it away and hold it for next year. We don’t see that very often,” she said. That’s because it’s expensive to store all this stuff, and fashion trends are constantly changing. “But a lot of retailers are planning on doing that now.”
A third option: Sell the clothes to an off-price retailer like T.J. Maxx or to shoppers by offering steep discounts. The Loft recently advertised shorts for $12.
They’re probably losing money on that short,” said Shelley Kohan, who teaches at the Fashion Institute of Technology. But she said they might lose even more delivering the item to an off-price retailer. Logistics can get expensive.
The problem with steep discounts, however: The more you do it, the more customers expect them.
One last approach we’ve seen retailers use in the past is to destroy their clothes. In 2018, Burberry said it burned tens of millions of dollars of unsold merchandise. It later promised not to do it again.
Burning clothes is a bad look, said Bill Lewis of AlixPartners. “Given the economic hardships that are out there right now, retailers aren’t going to want to be known for doing that,” he said.
He said they’d be better off donating the clothes.
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