Images of unsold inventory, with garments piled high like those that end up in landfills, are mostly associated with fast fashion brands, known for their high-volume goods. However, luxury brands face similar issues of excess stock, especially in times of weakened consumer demand.
Luxury brands often employ discreet and strategic methods to offload inventory in a bid to maintain brand image and exclusivity. Destroying unsold stock has been a longstanding and controversial issue, with brands stating they are phasing out the practice due to its negative environmental impact and ethical considerations.
One of the key ways in which luxury brands deal with unsold inventory is through outlet stores and off-price retail channels, where they sell excess stock at discounted prices. These outlets are often located away from flagship stores to minimize visibility and prevent dilution of brand value.
2023 will end with many brands having leftover inventory, as according to Bain, the growth rate this year is expected to be around half of what the industry achieved in 2022. A recent report in the Wall Street Journal highlights that luxury brands aim to avoid deep discounting, requiring discreet ways to unload unsold inventory “without appearing desperate.”
Destroying excess stock no longer viable
Since incineration is no longer a viable option, as per new EU regulations prohibiting the burning of fashion waste, brands are now resorting to a new network of unofficial resellers. These resellers acquire leftover goods and capitalise on regional price disparities, as reported by the WSJ. Although luxury brands have attempted to curb this practice, recent reports indicate that some brands are directly providing inventory to resellers.
According to PYMNTS, many luxury brands have updated their strategies to minimise wholesale accounts to avoid seasonal markdowns, instead opening directly controlled concessions in department stores and selling via their own retail network. This allows for full control of pricing as well as inventory.
Some brands, like Hermès, organise private sales events or send exclusive invitations to a select group of customers or even company staff. This approach preserves exclusivity and fosters a sense of privilege among a loyal, yet small, customer base. It also avoids having to sell discounted goods in their own stores.
The crux is that luxury brands have learned to manage excess inventory discreetly, minimising the potential negative impact on their brand perception and maintaining a sense of exclusivity.