The last two years have been a rollercoaster for fashion brands. The supply chain disruptions of 2021 led to many merchants struggling to get their hands on enough inventory, and then overbuying to compensate. But now, with an economic downturn looming and the threat of reduced spending, companies that overstocked during the pandemic are stuck hoarding mountains of goods in their warehouses that they can’t shift.
In fact, according to a recent survey by Inventory Planner, 44% of fashion retailers have surplus goods they’re desperate to offload, accounting for almost 20% of their entire stock holding. The poll also found that globally, one in four fashion stores wrote off excess stock as a loss last year, at huge cost to the business.
The danger of sitting on inventory for too long is clear. Target saw its shares tumble after it slashed prices to clear out unsold inventory. And British brands Made.com and Joules both recently entered administration after getting caught with massive inventory at just the wrong time.
Mountains of excess stock is a particular challenge for fashion retailers because products start to decrease in value after a while, and the seasonal effect can see items quickly go out of fashion or become redundant. Excess stock also means businesses have less room in their warehouses for new stock, as well as less cash to buy new items and jump on new trends.
How are Brands Dealing with Inventory Issues?
As demand slackens, American and British store chains are sitting on so much inventory that brands, particularly apparel brands, have resorted to offering major discounts. However, these tactics hurt the bottom line, with more than half of retailers admitting it will be difficult to absorb the loss of marking down prices, liquidation or writing off excess stock.