Excess inventory - bad for profitability AND the environment

Last month, Victoria’s Secret joined the list of retailers criticized for their harmful actions surrounding inventory disposals. A bystander found the company disposing of hundreds of bras outside a store location - further revealing the unspoken truth of the fashion industry. For brands reluctant to liquidate excess inventory in more traditional ways, physical disposal is often chosen regardless of its harmful environmental impact. These actions have catapulted apparel in becoming the second most polluting industry in the world behind oil.

Why all the excess?

Overstock of inventory can be caused by various reasons. The most common - mis-interpreting consumer demand and simply buying too much. Often a result of the fear of missing out, brands invest heavily into new collections in hopes that their marketing efforts can sell-through all the inventory. But due to variable factors such as lead times delaying the capture of trends or improper forecasting of demand, 100% sell-through is not always the case.

Take for example retailers Nike and Eddie Bauer, who both received backlash in 2017 for destroying and disposing of inventory in trash outside of their New York stores. Soon after, fast fashion retailer H&M followed suit on a much larger scale. After missing the mark on seasonality and fashion trends in 2018, they sold their unwanted inventory to a power plant in Sweden where it was burned as a source of energy instead of coal. While this avoided adding to the 26 billion pounds of textiles that end up in landfills each year, the process of burning clothes releases more carbon dioxide into the air than coal - further contributing to global warming.

Another popular reason defending these harmful actions is the preservation of brand equity. Oftentimes luxury brands, in an effort to protect their value, physically destroy excess inventory in order to avoid eroding their name with off price retailers or other charitable uses of the goods. This is precisely what fashion house Burberry did in 2018. Their admittance of destroying $37 million worth of goods caused an outcry which prompted them to publicly promise avoiding such wasteful methods.

Maybe they’ll consider off price as a more economic solution after all. As a buyer of overstock, resellers are gaining popularity in both their value proposition and impact on sustainability. Take for example TJ Maxx who unveiled their business model has saved 253 thousand tons of unsold goods from going into landfills. A drop in the bucket of overall global waste, but still an influential contribution.

A new model for the industry

Following these incidents, many countries are now taking a stand against this uneconomical treatment of excess stock. Some are going as far as banning the burning of clothes, putting increased pressure on accuracy of inventory ownership. How can you contribute to this global effort and make sure you’re not buying excess inventory? By using Fuse, brands have reduced their overstock by 70%. Our predictive forecast accurately captures demand, seasonality, and trends. With the appropriate variables accounted for, you can rest assured knowing you bought the right amount of inventory, every time.