COVID-19

What can clothing retailers do with all that excess inventory?

Marielle Segarra Aug 24, 2020
Heard on: Marketplace Morning Report
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Joe Raedle/Getty Images
COVID-19

What can clothing retailers do with all that excess inventory?

Marielle Segarra Aug 24, 2020
Joe Raedle/Getty Images
HTML EMBED:
COPY

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.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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