Is it time to sell, stow or dump?
Retailers wrestle with mountains of unsold stock
MADRID/LOS ANGELES — Forget fast or slow fashion, now it’s ground to a halt.
A mountain of apparel stock has been piling up in stores, distribution centers, warehouses and even shipping containers during months of COVID-19 lockdowns. As retailers reopen around the world, they have to work out how to get rid of it.
Their main options? Keep it in storage, hold a sale, offload it to “off-price” retailers like TJ Maxx which sell branded goods at deep discounts, or move it to online re-sale sites.
None are ideal, and all are damage-limitation.
Real estate company Knight Frank told Reuters it had fielded inquiries for excess stock for more than six million square feet (557,500 square meters) of short-term let warehouse space in Britain since the pandemic took hold there in March.
Yet storage is only a realistic option for evergreen “basics” that are not tied to one particular year and could be sold at a later date should consumer demand bounce back - items like underwear, T-shirts, chinos and classic sneaker styles.
Apparel chains including British high-street retailer Next and German sportswear brand Adidas said they had stashed away unsold basics, with the aim to offer them to shoppers next year instead.
But stowing away piles of inventory is risky.
“This is not like wine that gets better with age. Your inventory gets worse,” said Emanuel Chirico, chief executive of PVH Corp, which owns Calvin Klein and Tommy Hilfiger, on a recent earnings call.
In the United States, clothing sales fell 89 per cent in April from the same month in 2019, while in Britain clothing sales sank by 50 per cent compared with an alreadysqueezed March.
Retailers hope that easing of lockdown measures will see shoppers return to stores. But there is no guarantee that sales will rebound any time soon.
DUMPING INVENTORY
Many stores are likely to pursue a combination of holding sales as well as selling stock to off-price retailers. The mix will depend on consumer appetite, how much merchandise stores have to shift and how fast they must free up space for new collections.
In-store discounts are usually a better option as dumping inventory in bulk to off-price players returns just pennies on the dollar for the retailers.
‘MOST INSANE SALES’
Potentially more lucrative is moving merchandise to online re-sale marketplaces that take a commission on sales, although that option is largely only open for highend brands.
California-based luxury re-sale marketplace Tradesy opened a new business unit in April to deal with the jump in brands looking to sell stock they were stuck with af-ter department stores cancelled wholesale orders, said CEO Tracy DiNunzio.
“A number of these brands are set to go live in the next couple of months,” she said, adding some may set up their own landing page on Tradesy while others would sell more discreetly.
Apparel was still the number-one category for spending cutbacks among U.S. con-sumers surveyed by Coresight Research on May 20. Non-essential retailers are set to reopen on June 8 in New York City and June 15 in Britain.
Even some shoppers are plotting a quick profit using re-sale websites.
“We’re going to see the most insane sales,” said Melissa McAvoy, founder of events company Luxury Experience & Co, who lives in the celebrity-studded Los Angeles suburb of Calabasas.
The 43-year-old said she planned to snap up merchandise at a discount, to then resell it at a higher price online at a site such as Californiabased Poshmark, which also makes money by taking a commission on sales.
“I’m going to get a ton of stuff and either wear it once or put it on Poshmark,” she said. *Additional reporting by Melissa Fares in New York and James Davey in London.