A new French law is forcing industry giants to donate or recycle unsold goods that they would have otherwise destroyed.
Apparel companies, from elite fashion houses to mass-market chains, are saddled with an inventory glut following months long closures during the pandemic. Now, they are trying to get rid of the excess without angering waste-conscious consumers—or harming their brands, reports The Wall Street Journal (Aug. 14. 2020). (Links to an external site.) In the U.S., brands and retailers locked out of an entire fashion season are flooding charities with unsold products, in addition to sending goods to discount stores and liquidators.
Good360, a nonprofit that collects excess merchandise and distributes it to charities, expects more than $660 million in donations for the entire year, double what it received last year. “Brands don’t want their unsold products winding up at flea markets or on Craigslist,” said the CEO of Good360.
LVMH—which owns Louis Vuitton, Dior and other brands—booked a $200 million write-down on its inventories for the first half of the year, because many products destined for the spring/summer fashion season were ordered just before much of the West went into lockdown.
Big retailers sometimes destroy returned products rather than deal with the cost of trying to resell or even give them away. Brands that destroy unsold goods have sparked outrage from consumers, politicians and environmental groups. French businesses destroyed $700 million in unsold goods in the most recent year with available data– six times more than they donated. But high-end fashion companies fear angering clientele who would spend thousands on a designer dress or bag, only to see the same item a year later at a discount store selling for a fraction of the price.
Questions:
- How did these policies impact the computation of Inventory Demand?
- If you are an Inventory Manager, what will you do to lessen the company's losses?
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