By Matthew Dalton
Apparel companies, from elite fashion houses to mass-market
chains, are saddled with an inventory glut following monthslong
closures during the pandemic. Now, they are trying to get rid of
the excess without angering waste-conscious consumers -- or harming
Some fashion companies have for years quietly destroyed unsold
goods rather than allow them to be sold at a discount. But that
practice is drawing increasing scrutiny from environmental groups,
shoppers and governments, forcing brands to find fresh ways to move
clothes, shoes and other products piling up in their
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, said it has received tens of millions
of dollars' worth of apparel donations during the crisis; it
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 Matt Connelly, Chief Executive of
Good360. "We provide assurance that's not happening."
In France, home to much of the world's luxury fashion industry,
the government this year passed the world's first law forbidding
companies from destroying unsold, usable goods. The European Union
has proposed a similar ban that would cover the entire 27-nation
The French law, passed weeks before the pandemic hit Europe in
March, is pushing industry giants such as LVMH Moët Hennessy Louis
Vuitton SE and Amazon.com Inc. to donate or recycle unsold goods
that they would have otherwise destroyed. Companies are forging
fast partnerships with recyclers and charities with the capacity to
accept and distribute large quantities of goods. They face
thousands of dollars in fines if they violate the ban, which will
come into force by the end of next year.
LVMH -- which owns Louis Vuitton, Dior and dozens of other
brands -- booked a EUR170 million ($200.4 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.
"From a sellout viewpoint, it was not ideal, as we closed most
of the stores immediately thereafter," said Jean-Jacques Guiony,
LVMH's chief financial officer.
Brands that destroy unsold goods have sparked outrage from
consumers, politicians and environmental groups. In 2018, Burberry
Group PLC said it would stop destroying inventory, after disclosing
that it burned GBP28.6 million ($37.3 million) worth of stock in
the previous fiscal year.
Companies, in particular luxury fashion firms, do it because
they 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.
Luxury fashion brands employ teams to ensure that unsold or
flawed products don't find their way to unauthorized retailers.
Brands first attempt to sell them to employees, and then friends
and family. What goes unsold after that is often incinerated.
LVMH said it works with a specialized recycler, Nordechets, to
avoid the destruction of unsold goods. At a facility in the Loire
Valley of France, jewels and precious metals are recovered. Items
bearing the logo of a brand are shredded and reincarnated as fiber
Yet just 11 of LVMH's 75 brands recycle with Nordechets, and
even those that do still destroy some products that the facility
Big retailers sometimes destroy returned products rather than
deal with the cost of trying to resell or even give them away. In
France and other countries, companies can recover the value-added
tax for products they destroy, but not for those they donate.
"Often businesses tell us that, overall, it costs more to
destroy than to donate," said Victoire Scherrer of Agence du Don en
Nature, a French nonprofit that distributes excess inventory from
big companies to local charities.
During the pandemic, Gap Inc. donated more than $60 million in
unsold apparel, a spokeswoman said. That came as it marked down its
inventory by $235 million in the three months ending May 2.
"Overall, we destroy very little inventory, and only do so if
the product is damaged and therefore deemed non-sellable," said Gap
spokeswoman Justine Jordan.
Guess? Inc. donated 45,000 items of clothing to Good360, as it
set aside $70 million in the quarter ending May 2 for losses on
Estimating how much unsold inventory is destroyed each year is
difficult, because companies prefer to keep quiet about the
practice. A French government study estimated that French
businesses destroyed EUR600 million in unsold goods in 2014, the
last year data are available. That was six times more than they
The new law has France gearing up for a surge in donations.
"We're expecting very strong growth," said Sonia Rodrigues,
logistics director at Dons Solidaires, a French nonprofit. "We're
working to ensure that there will be enough space to accept all
these donations," she said.
At its warehouse south of Paris, Dons Solidaires receives
pallets of diapers from Procter & Gamble, pens by the thousand
from Bic, some household appliances and myriad other goods. Toy
donations surge around Christmas. The organization repackages and
ships products to around 600 charities across France.
Numerous companies have approached the group ahead of the
passage of the new law, and it is recruiting more volunteers and
preparing to rent more warehouse space to manage the expected
influx of donations.
Amazon said it is rolling out a program in France that allows
its third-party merchants to give their unsold stock in Amazon
warehouses directly to charity. "We hope this will drastically
reduce the destruction of product, with the objective of bringing
this number as close to zero as possible," Amazon said.
Last year, an investigative report by the French television
channel M6 found that Amazon was destroying thousands of products.
The report helped prod the government to include the ban in
waste-reduction legislation passed last month.
Amazon has rolled out its donation program for its U.S.
merchants. The e-commerce giant still destroys unsold goods in the
U.S., and charges its third-party merchants a fee for doing so.
"In certain cases, we are unable to resell, donate or recycle
products, for example for safety or hygiene reasons," said Amazon
spokesman Dan Perlet.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
August 13, 2020 10:39 ET (14:39 GMT)
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