OVERPRODUCTION AND OVERCONSUMPTION
All of these wonderful options we have discussed offer the customer the choice to re-buy and re-sell, but how do we work towards reducing the waste caused by pure “overproduction” and “overconsumption”, the two, single, most destructive factors within the fashion industry. Academics like the Union of Concerned Researchers in Fashion and activist groups like Extinction Rebellion say that the growing number of sustainability efforts are a distraction if the shifts in production practices are not accompanied by reductions in volume (Vogue).
The continual drive for “newness”, means that brands are forced to design 4 to 52 collections a year. The continual demand from consumers is the dichotomy of the fashion industry and the desire from brands to maximise revenue at any cost, results in piles of deadstock. Even before the pandemic companies such as H&M revealed they had $4.3 billion worth of unsold clothes. In April, 2020 it was revealed that Primark had taken a £284 million hit from stock it could no longer sell, while Marks & Spencer revealed in May 2020 it would be ‘hibernating’ around £200 million of unsold seasonal stock until Spring 2021. With the lockdown, the issues with overordering, cancellations, reduced sales and closed stores exasperated the already broken model.
What does happen to the excess stock that brands own?
5 years ago, brands wouldn’t worry about burning their deadstock, because the prevailing paradigm was that the perception of leanness was more important than sustainability. Fortunately, and particularly after Burberry came under scrutiny for destroying more than £90m worth of stock, there is more pressure on brands of how they are disposing of this burden.
There is no law that prevents companies from destroying dead stock and it’s often cheaper to do this rather than find a way of recycling, storing and re-using. Overall there needs to be a more positive approach from brands to reduce their overstock in the first place, or maybe it’s time that governments took action as France are doing. France announced that by 2023 it will be illegal to destroy unsold goods, an anti-waste law that Susan Scafidi, founder of the Fashion Law Institute, says is “ground-breaking”.
Another major issue for brands is the number of product returns which is tied to the rise of online sales. Returned items can be tricky to resell because many businesses are not equipped with the necessary infrastructure or technological capacity and they can easily end up as discards. According to Optoro, a reverse logistics company that works with retailers and manufacturers to manage and resell returned and excess inventory, the overall return rate for online shopping across industries is 25 per cent.
Discount outlets are a great way to manage part of the excess inventory, retailers such as “Outnet”, ‘Farfetch”, “AliBaba”, “TKMax” provide this service but it’s usually not profitable for the brand to sell them the stock. Brands can donate to colleges or charities and they can hold sample sales but the cost incurred by the inefficiencies, plus unwanted stock tied up as cash will seriously hurt the bottom line. If a company ends up with 35% of deadstock, that’s 35% of the gross profit that’s just eaten up in holding inventory.
One company offering an all-round solution is the Parker Lane Group, a UK based company that works with clients to handle excess inventory and customer returns. Their remit is to help brands find markets for unsold clothing and recycle items that can’t be resold, they aim to find the most efficient end use for each item. “All waste has value if you know how to handle it” says their chief executive Raffy Kassardjian. US- based Optoro offers brands a similar service for dealing with unsold goods. Using AI and machine- learning software, it’s platform processes millions of items a year, marking each for donation or donation.
According to the Ellen MacArthur Foundation, less than 1% of material used to produce clothing is recycled, this equates to a loss of more than $100 billion worth of materials a year. There are many contributing factors to this excess in luxury apparel, one being the lead times of the fabrics versus the timelines of the seasonal calendar, neither are in synch. For example you may have an Italian mill that’s created a fabric where the lead-time is 3 months, by the time you’ve added on shipping and production you have a 5 month production lead time. If you take a season such as Spring/Summer, the order book for wholesale doesn’t close until late September and brands are asked to deliver the stock in January. This means that brands need to place fabric orders well before they know the global sales, undoubtedly even those with the best crystal ball won’t forecast perfectly.
Fortunately, the market for deadstock material is alive and kicking. The New York City based Queen of Raw operates an online marketplace that buys and sells unused fabric waste which is a great way for retailers to free up cash. Co-founder Stephanie Benedetto says that brands can recoup up to 15 per cent of their bottom line by letting them sell their unused fabric stock. In the past year the brand has grown 110 percent, year on year and has over 100,000 users that include fast fashion brands as well as luxury fashion houses. Another luxury group jumping into this space is the LVMH group who launched Nona Source in April 2021, this is a new sustainably focused platform selling dead stock which is open to everyone, not just those brands within the LVMH group.
Despite all these innovative opportunities and channels for managing waste, brands also need to work towards reducing their overall overproduction and customers their “overconsumption”. Both technology and moving away from the standard ‘linear” business model are critical in helping the fashion industry achieve this required change.