How Can Fashion Brands Manage Overstock?
Brands have huge quantities of unsold clothes that they have to deal with. How does it work, and what is the future of overstock management?
Running a brand is no easy task. Overstock management has become a greater challenge than ever before as the fashion industry grows in sales volumes. Finding effective and sustainable ways of dealing with pre-consumer waste is not straightforward. Not only does it risk serious damage to brand image, but unsold clothes can also easily accumulate and become a burden for companies. However, the good news is that serious progress is being made in this area. With modern technology, improved systems for efficiency, and a bigger focus on circularity, managing unsold articles will no longer cause the headache it used to. New approaches will be scalable by putting real effort into holistic change and improvement. And considering the attention sustainability and waste are receiving in the media, brands need to start doing something to stay in line with consumers’ increasingly high expectations.
"The ideal solution is if the unsold product is never produced in the first place"
A complex issue does not have a simple solution. The challenge of surplus stock and overproduction in fashion must be tackled from multiple angles simultaneously. However, the core to increasing effectiveness in a sustainable manner is structure and strategy. Brands must have a clear and dedicated strategy to deal with their unsold products. There needs to be a system in place, from minimizing overproduction to reintegrating unsold products into different streams for reuse.
The first angle which a brand needs to take to tackle the problem is reducing the amount of overproduction in the first place. The ideal situation for the environment and for the company is obviously if a product that will not be sold is never produced in the first place. While fully eliminating overstock is almost impossible, certain approaches can be taken to reduce it.
Brands need better internal organization and collaboration to increase effectiveness, improve performance, and reduce waste. Different departments, such as the designer, production, finance, and sales teams, need to improve communication with each other. With optimized and effective collaboration, brands can reduce the sources of waste and better plan their production, taking all aspects into account while reducing overproduction. Tekyn is an example of a start-up that makes collaboration easier. Their online platform allows for more effective communication between the brand and the workshop on production projects.
Brands also need to improve demand forecasts. The difficulty in predicting fashion demand is a key driver of excess inventory. A brand that better predicts what products will sell will perform better and increase first-choice sales. One way to do so is through the use of AI and machine learning. With modern technology, predicting trends is becoming increasingly accurate. One such example is the French start-up Heuritech. By analyzing vast amounts of data, such as consumer sentiment, social media trends, and even photos and images, their AI-based solution can more accurately tell brands what type of products will likely be trending next season.
Stock Replenishment and Product Testing
A technique that can help brands to reduce overproduction is product testing. Product testing means producing a smaller quantity of a new product to test if it performs well. If the brand notices that there is sufficient demand for it, the product can be produced in bigger quantities later on. Should the product not generate many sales, the brand can choose not to produce more of it, meaning they save money from the cost of mass producing it. This can be an effective way to reduce overproduction in the first place by only producing successful products in bigger quantities.
Another inventory technique that takes this concept one step further is on-demand production. This is when a brand only produces a product once an order has been placed. In theory, this means that a company will only produce exactly the amount of goods it will sell, eliminating unsold products. On-demand production is effective for brands that sell in part or fully through e-commerce channels. Asphalte is one successful example of a brand with this production model.
"Even the best-practicing brands have 2-3% overstock"
Management of Overstock
While reducing overproduction in the first place is the ideal solution to the problem, it is highly difficult to eliminate completely. Even many of the best-practicing brands have around 2-3% surplus stock. The average lies around 25%. That is why it is vital for brands to also implement effective management strategies for the unsold goods that they have. However, while effectiveness is important for brands, it is equally important to take sustainability into consideration. With a clear overview of available options, unsold clothes can be streamlined into circular paths rather than landfills or destruction. There are four main possible ways for brands to reintegrate overstock into the system, and the benefits of each one.
Reselling is a common way to manage overstock, involving different types of actors. Brands typically have internal outlets that might be located in larger stores outside major cities. There are also external outlets not owned by the brands, as well as online outlets and online private sellers that help monetize clothes. The advantage of this strategy is that it allows for the highest amount of monetization for unsold clothes, minimizing the loss of revenue. However, it can also cannibalize brand sales since customers might start to wait for reductions before buying.
Donations are an excellent way for companies to clear their excess stock. By donating to organizations such as The Red Cross or Emmaüs, companies can free up storage space and provide clothing to people in need. This can help companies save costs and contribute to a good cause. Moreover, by participating in such initiatives, companies can also improve their corporate social responsibility and brand image and receive tax cuts in some countries. It is a win-win situation for all parties involved as companies can clear their inventory while helping out those who might not be able to afford clothing, and organizations can provide aid to people in need. What is important with donations is that the NGOs’ needs are met as well; they require specific clothing to better help people in need. For example, they might need jackets during winter, not T-shirts.
Recycling is a third option that is a sustainable solution to stock management campaigns. For products that cannot be resold or donated, such as defective clothes, recycling is an excellent option that creates new fibers from old clothing. These fibers can then be used in the brand’s new designs or sold as fabric to other brands. Another option is downcycling, a process in which a new product with an inferior value is created, such as a rug or insolation material. This approach is environmentally friendly and offers a way to reduce waste and carbon footprint. However, overstock recycling still needs to grow since most efforts go towards used clothing waste and not unsold clothes. The industry as a whole also needs to scale its technology and infrastructure to become a real option for dealing with unsold clothes.
Another upcoming but not yet so developed possibility for reusing surplus stock is through upcycling. Upcycling is the process of creating a product that has a superior value to the products it was made from. In fashion, this translates in broad terms into creating new pieces of clothing from old clothes. Upcycling is a rather lengthy and creative process, difficult to scale to a level where it becomes a real solution to overstock. To scale upcycling as a solution to surplus stock, certain new processes have to be put in place. For example, there is a need for manufacturers specialized in effectively cutting and preparing clothes for upcycling.
Unsold clothes and other inventory can quickly accumulate and become a financial burden for companies. However, the good news is that progress is being made in this area. Thanks to new technologies and innovative techniques, the industry is beginning to take steps towards more circular and sustainable practices. With the rise of circular fashion, brands are now rethinking the entire product lifecycle, from design to disposal. This shift in mindset is good for the environment and business, as companies can reduce their waste and operating costs while improving their reputation with consumers who increasingly prioritize ethical and sustainable practices. The challenge now is implementing these new approaches at scale and ensuring they become the norm rather than the exception.
FINDS is the first tool that works to scale sustainable approaches to overstock management. Our technology automatically connects brands’ overstock with resellers, recyclers, and charities based on brand objectives and the sourcing criteria of partners. Our platform is designed to give brands the visibility of available options they need to make informed decisions about their overstock. Additionally, we offer an easy-to-use interface that simplifies the process of managing excess inventory. Managing surplus stock has never been easier.
With FINDS, brands can streamline their inventory management and contribute to a more sustainable future by diverting their overstock from landfills and towards socially and environmentally responsible disposal options. So join us today and let us help you make better choices for you and for the planet!
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