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What’s Going to Happen to All of Fashion’s Mounting Merchandise?

When the COVID-19 crisis finally lets up, fashion’s next-most-pressing mandate will be to manage the crisis of stuff.

That stuff, the industry’s spring and summer merchandise, is currently sitting in factories, in warehouses, in distribution centers, on the water, at the docks, in port-side storage, and in the back rooms of shuttered brick-and-mortar stores. And that says little of the fall/winter merchandise orders some brands are promising to place with their currently out-of-work factory partners.

“Basically, it’s a mess, it really is a mess,” said Karla Magruder, a founding partner of Accelerating Circularity, a collaborative industry project aimed at accelerating the textile industry’s evolution from a linear to a circular model. “There is literally not a place to put all this stuff.”

Once retail reopens, the inventory predicament becomes manifold: Where will all of that merchandise go, and once it hits, will consumers be open to buying it? If it can’t be sold, what happens then?

Stores will be the first stop for much of the oversupply, but with the cooler seasons’ product so far slated to follow close on its heels, retailers won’t be able to wait it out while demand trickles back in.

“Brands and retailers are going to want to unload that product as quickly as possible,” said Doug Cahn, founder of corporate responsibility consultancy The Cahn Group. “There’ll be heavy discounting and they’ll look to clear out inventory, so I think we can likely see dramatic reduction in prices in the very short term.”

Some experts are predicting markdowns could meet Great Recession levels of 70 percent off and upward. But some money may be better than none for retailers trying to recover from plummeting profits.

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“It’s important for the industry to find solutions that will maintain as much value as possible in the products, keep people employed and their business alive,” Magruder said.

Escalated levels of discounting, however, pose their own problem for an industry that was already locked in a vicious pre-virus cycle of markdowns that have made consumers balk at buying anything full price.

“A lot will go on sale, even though it would be great if it didn’t, because it’s just [making] it even more difficult for the industry to survive with these constant sales,” said Morten Lehmann, chief sustainability officer of the Global Fashion Agenda, which has made fashion’s sustainable transformation its mission. “We know that too much is already ending up at landfill and there’s a huge risk that even more will end up at landfill. So that is what we are trying to look at, what could be some of the solutions, because that’s a big worry.”

The industry is generating “a huge amount of waste now,” Magruder said, adding that discounting won’t clear enough of the goods from store shelves anyway. In the forced reprioritizing of essentials over excess brought on by the pandemic, she said, “People are not buying stuff just because it’s discounted.”

Post-COVID-19 may be the period that sees some in the industry finally buried by their excess inventory.

“Part of what’s going to take people out here is not just the cash management over the closing period,” said Steven Bethell, founder of Ottowa-based Bank & Vogue, which buys and trades used apparel goods. “The next phase is probably a bigger storm than just shutting down and not paying their rent. This is the part of the exiting of the stock.”

Where do clothes go from here?

While there’s been talk of the coronavirus pandemic finally righting fashion’s seasonal calendar, in line with the actual season and consumers’ buy now, wear now wants, the move may not manifest in time to fix 2020. There’s no telling yet whether consumers could be swayed to buy spring product that’s been remanufactured to work for fall, or whether they’ll snag this spring’s goods for next year’s spring, but both are options fashion’s more innovative are mulling.

One solution, Lehmann said, could be to upskill manufacturers with a dearth of current work, enlisting them to remake or redesign goods to be ready for the coming season, but that comes with its own challenges.

“It’s so complex with how the supply chain is structured,” he said. “Some of it would be sold to local markets, but then there’s the size issues that some of it doesn’t fit the Asian sizes…so there would still be things you couldn’t sell even of you go for the local markets or the manufacturing-level markets.”

Bethell, who also operates a remanufacturing facility in Gujrat, India, said interest in the option is already ramping up.

“We’re having really strong and good conversations with some good brands about taking on inventory and remaking it,” he said. “It’s not even a sizing issue, it’s…taking an existing item and turning into a value item, reworking and upcycling product.”

Brands considering this option, he said, should be thinking about whether the garments they have on hand could be supplemented with an add-on that ups the interest, or whether a silhouette change could improve seasonal relevance.

Beyond remanufacturing for this year, some brands and retailers may look to spruce up spring/summer ’20 goods and hold them off for spring/summer ‘21, but the issue there becomes one of storage.

“The manufacturers can’t store all these goods,” Lehmann said. “So, I think that is one of the big questions that all brands—or the whole value chain—is trying to find a solution to. What do we do with the deadstock and with the overstock?”

Deadstock’s fate

Some of that deadstock and overstock will make its way to discounters, like T.J. Maxx and Ross Stores, which will be spoilt for choice when it comes to merchandise to take in.

Retailers will likely have to offload this product to discounters at significantly slashed prices and still, they may not be able to part with enough of it. As their stock on hand will be more than just the one-off pieces leftover at the end of the season, they’ll have a hard time convincing stores in this discovery shopping category to take too much of the same thing. It’s a similar challenge they’d meet on the secondhand market, likely fashion’s next stop for its unsold stock after doing what it can with discounters.

“Often what happens in the new businesses, you’ll get 100 green dresses or 100 blue dresses, but no thrift operator wants to put 100 green dresses in their shop. They want to mix them up because that’s what makes thrift or a T.K. Maxx kind of shopping environment exciting,” Bethell said. “I’m not sure that you’re going to see a lot—unless it’s a strong name brand—of the new product necessarily in domestic thrift. The new product people are going to be better off either selling it to a discount retailer or selling it to jobbers who sell it to an export market.”

The trickle-down effect of unsold textile goods across the globe will weigh down on the secondhand market, which, itself, will be overloaded with inventory when people can finally peek out from their hideouts. And many of those people will have Marie Kondoed their homes while quarantined, and have their own goods to offload to local charities and thrift stores.

“The suspicion is that as soon as restrictions are lifted, there’s going to be a flood of donations, but if there’s so much that the system can’t handle it or can’t digest it, that will then be pushed onto world markets,” Bethell said. “Those world markets, probably they’re not going to be able to handle the volume as well.”

All of this also says little of countries’ banning of used clothing imports for the sake of boosting their own domestic markets, or consumers’ concern that shopping secondhand means goods could be at risk for coronavirus contamination.

Then there’s the logistical considerations of getting unsold goods to their various new receptacles: Will the goods have to be repackaged for shipping? And who pays for the shipping?

“There’s cost involved in just moving it,” Magruder said.

Put simply, offloading apparel goods post-coronavirus won’t be simple at all.

“There’s an analogy with oil,” Bethell said. “Not that there isn’t a value to, but there’s going to be a space problem. You physically won’t have any space to put this stuff, and if you try to hold onto it, unlike oil, there’s a seasonality issue there.”

Landfill or nah?

If the glut of garments can’t be sold at markdown to discounters or on the secondhand market, brands will have to turn to charity as the next option for unpacking that product. And from there, recycling.

“It’s brand-new merchandise, so you really don’t want to do that, but it is better than it going to landfill,” Magruder said. The problem there, she said, is that “right now textile banks are overflowing and the sorters are going out of business because they can’t sort and send it anywhere because nobody is open to take those goods.”

Innovation, it seems, will be key in exiting the surfeit of fashion product, and if the industry can get sorting sorted and fold circularity into its considerations, there could be new opportunities to use recycling to turn sitting goods into sustainable garments.

Bethell’s Bank & Vogue supplied some post-consumer denim to Renewcell, which it used to make a dress for H&M’s Conscious Exclusive collection this year. The dress was made of 50 percent Circulose recycled from used cotton jeans, and 50 percent wood from sustainably managed forests.

“We were able to process the cotton jeans…which they used as an input to their process,” Bethell said. “So, a percentage of the product that they’re using to recycle is deadstock product. Innovative solutions like that will become more of a demand.”

Textile waste is by no means a new problem, but COVID-19 could carry the crisis up a category level.

By the U.S. Environmental Protection Agency’s most recent estimates, 16.9 million tons of textile waste were generated in 2017, accounting for 6.3 percent of all municipal solid waste collected that year. Though recycling has ramped up, just 2.6 million tons of that total textile waste was recycled in 2017, 13.6 percent of which was clothing and footwear.

The societal responsibility that has come as a side effect of the coronavirus, however, could keep spring/summer ’20 goods out of the dumps.

“I don’t think brands are going to landfill product, I think people are too astute for that,” Bethell said. “I think people are going to take enormous haircuts on pricing.”

Magruder agrees.

“There’s so much pressure on companies to do the right thing now, I think that people really don’t want to end up sending things to landfill. I think they’re going to try really hard not to do that,” she said.

All options considered, there’s little way for fashion to win financially as it works itself out of an inventory conundrum that had been piling up even before the pandemic.

“This is a recovery conversation at best,” Bethell said, “not a money maker.”