What should you do if you find yourself with a warehouse full of items consumers don’t want, at least not at full price? Burn it!
And I don’t mean for the insurance money - honest, I’m not advocating any dodgy insurance scam, I’m talking about legitimately making a strategic business decision to tackle surplus stock by burning it.
Sounds crazy doesn’t it?
Well, that’s exactly what designer retailer Burberry do (and they’re not alone). They destroyed unsold clothes, accessories and perfume worth £28.6m last year to protect their brand, taking the total value of Burberry goods destroyed over the past five years to more than £90m!
Why would any retailer go to such extreme measures as burning unwanted stock?
In recent blogs we have been exploring the options available for handling the rising levels of unwanted product, fashion retailers are currently seeing, H&M reported a surplus of unwanted product worth $4.3 billion in their recent financials. The most obvious option is simply to discount - walk down any high street or open one of the multitude of retailer emails sitting in your inbox and you will see that the SALE solution is being heavily adopted by brands. According to Mallzee Insights data 53.4.% of all fashion products available on the high street, right now, are being sold at discount, compared to only 48.8% in 2017.
The problem with discounting especially when it gets to these levels and becomes sustained is that it conditions your shoppers to expect to pay a lesser price and thus devalues your brand. Last week we explored the rise of the discount department store where retailers offload unwanted stock at discounted prices but away from their regular customers and stores in the hope that this distance halts the devaluation of product value.
Yet for premium designer brands such as Burberry, Gucci, Louis Vuitton etc whose whole appeal lies in being instantly recognisable as a designer (read… expensive) product, discounting unwanted stock is not an option as the brand loses its exclusiveness if consumers believe that it can be purchased at a reduced price.
A spokesperson for Burberry says they burn product to prevent goods falling into the hands of counterfeiters and that “Burberry has careful processes in place to minimise the amount of excess stock we produce. On the occasions when disposal of products is necessary, we do so in a responsible manner and we continue to seek ways to reduce and revalue our waste.”
It’s not only designer brands who are resorting to burning unwanted clothes. Last year it emerged a Swedish power plant was burning unwanted H&M clothes instead of coal. The plant in Vasteras, northwest of Stockholm, incinerated 15 tonnes of the retailer’s products in the first 11 months of the year.
Although the reasons weren’t to avoid counterfeiters, more that the stock hadn’t been stored well. An H&M spokesperson interviewed at the time, stressed it did not burn “any clothes that are safe to use” and said much of the destroyed stock was mouldy or contaminated with lead.
Brands who are deliberately burning stock are attempting to mitigate against public outrage by highlighting that they are burning this stock in an environmentally efficient way but burning stock also raises a series of ethical and moral issues. In a world where almost half of the population lives in poverty (3 billion people live on less than $2.50 per day) a business decision to sacrifice (burn) millions of pounds worth of perfectly good product in order to protect and maintain brand value could yet face a moral public backlash and ultimately damage a brand’s reputation.
The Burberry and H&M stats are astonishing as they highlight that this is an ongoing practise - hardly a short term fix to a couple of poor stock ordering decisions. To my mind it’s only a matter of time before there is a huge public outcry and retailers really need to resolve their surplus stock issues at source - make improved product and stock ordering decisions in the first place!
How? Well we think by testing products before bringing them to market to understand their likely performance against various customer groups and overlaying this with historical sales data.