Unsold fashion: What happens to merchandise when stores are closed?

Since the pandemic outbreak, the fashion industry has been fearful of vast amounts of unsold merchandise from brick-and-mortar stores. Last spring, many designers and brands postponed a part of their collections to 2021. However, now, even in 2021, the world is seeing months-long lockdowns. With an unusual winter and collections being pushed till autumn, the momentum of fashion is not only backlogged, it’s causing chaos.

At the beginning of the pandemic, one thing was remarkable. All of a sudden, fashion companies were willing to openly name their problems. Orders were canceled, rents suspended, payment terms were extended, goods were refused, furloughs were announced, collections were thinned and the rest put into stock, new strategies were devised - and the public became aware of all of it. Now? Radio silence. Neither brands nor retailers have any need for public discussion. What about all the merchandise leftover from last spring that can now be sold? What happens to unsold winter merchandise that had to be removed from stores to make way for spring collections?

Winners of the crisis: marketplaces

With retail lockdowns, marketplaces suddenly became an essential option for brands and retailers as they moved their operations online in a bid to sell stock. The growth of marketplaces during the pandemic has shown were large chunks of merchandise have gone. Amazon added about 295,000 new merchants worldwide in the first three months of the current year alone. The US market held the majority for new additions, accounting for nearly 77,000 merchants, or 26 percent. Around 18,000 new retailers have joined Amazon.de, making the German platform the third fastest-growing Amazon marketplace in Europe, after the UK and the Netherlands.

According to online fashion retailer Zalando, its marketplace business has multiplied. The gross volume of merchandise, which includes Zalando’s own sales and sales via the ‘Connected Retail’ platform from third-party providers, is expected to grow by 50 percent in the first quarter alone. By 2025, 50 percent of total gross merchandise volume is expected to come from partner brands and retailers.

Like marketplaces, there are other channels to sell the remaining stock, such as shopping clubs specializing in selling surplus goods from brands. However, their inventory and factory capacities are also currently reaching their limits.

Ship from Store: merchandise from physical stores sold online

Numerous chain stores have been making efforts to connect their branches to their in-house product network to prevent goods from lying around unused behind brick-and-mortar stores’ closed doors. “Ship from Store is being used more and more,” said Martin Öztürk of Roqqio, which specializes in software for brick-and-mortar retail and e-commerce and can connect any number of stores to its central warehouse. This way, the stores’ goods can be integrated into the online trade, provided that the shops are ready to pack parcels. This tool has been helping brands sell merchandise during the lockdowns. The advantage: “The retailer retains its independence, remains visible to the customer, and does not become completely dependent on Zalando in the online business,” adds Öztürk.

Reselling remaining stock: The channels are tight

The resale of leftover goods is also a solution. But: “There is an incredible amount of goods on the market,” stated Andreas Meyer, who is currently in demand with his company Captiva from Neuss, Germany. He buys up remaining stock and sells them to other countries, mainly within Eastern Europe. For weeks, he has received at least five inquiries a day from retail chains or large fashion retailers who want to sell their goods - not counting inquiries from small retailers. “That is a situation that I have not yet experienced in the business in 25 years. It’s about livelihoods.” The main problem is the winter goods, which in 2020 were still delivered on time and paid for by retailers, but then couldn’t be sold. “But we can’t sell winter clothes anywhere now either - not even in Russia,” Meyer explains.

All he can do is store the goods and try to get rid of them next fall. The situation is similar in many other countries. Wherever shops are closed, there is leftover merchandise sitting idle that needs to go somewhere. This means that the supply of remaining stock is enormous, but the demand is low. This is reflected in the purchase price, which is currently 50 percent lower than in a typical buying season.

Last chance: donations

Donations are the last resort to get rid of leftover goods and free up storage space. But even this final act of desperation can cost money in the form of sales tax in many places such as Germany. Since mid-March and as part of a new government aid package, it is now possible for the first time in Germany to donate seasonal goods at no cost. Already at the end of February, traders, and charities demanded that clothing donations should become more accessible for those in need.

This article was originally published on FashionUnited.DE, translated and edited to English by Tess Stenzel.

Image: Via Pexels