Why the luxury items you covet may be out of stock – fashion houses make less to avoid destroying unsold items
- Destroying unsold stock rather than offering discounts or giving items away has been standard practice in luxury fashion
- France has banned the practice, leading labels to manage stock levels more closely and to donate unsold clothes, discount them to their staff or upcycle them
In the extravagant world of the French luxury industry, brands once preferred destroying their unsold goods rather than offering their high-priced products at a discount.
But those days of binning unwanted coats, handbags and shoes are over, after a new anti-waste law came into force in France at the start of 2022.
Now luxury houses are managing their stocks more carefully, offering deals to staff, making donations and recycling.
“It’s a subject that has become important today,” said Julie El Ghouzzi, a luxury goods expert at the Cultz consulting agency.
Markdowns to move goods are not a favourite option in the luxury business, as lower prices can undermine the attractiveness of their labels, which thrive on their elite status. “In the luxury sector, if the price tag is lower, so is the desire to buy it,” said El Ghouzzi.
Luxury houses are paying more attention to the subject now, said Arnaud Cadart, a portfolio manager at Paris-based asset manager Flornoy. “Mentalities have changed; we’re no longer in an economy that values unbridled creation above all else,” he said. Also gone is the mentality that “if it doesn’t work we’ll destroy it”, he added.
Now luxury houses strive to fine-tune their stocks. The Kering group, which owns Gucci, Saint Laurent and Balenciaga among others, has invested in artificial intelligence to better manage its stock.
Nevertheless, she acknowledged that the new law will push luxury houses to learn more about their clients to better anticipate their purchases and reduce stocks to a minimum.
El Ghouzzi said Louis Vuitton is already quite good at keeping track of its stock. “They know exactly what they have in stock and are capable of managing it down to the millimetre,” she said, adding “that’s not the case in many other houses”.
When there are nevertheless unsold goods, selling them to staff at lower prices is one option. These large fashion groups have large workforces, with more than 150,000 employees at LVMH, 38,000 at Kering and 16,600 at Hermès.
Donating unsold clothes to associations is another option. LVMH has a partnership with Cravate Solidaire, an association that collects donations of work clothing and gives it to people from disadvantaged backgrounds who are looking for employment.
Designers have also begun to make use of discarded or leftover materials, known as upcycling.
“Previously, a designer with a brilliant idea would go search for materials to realise their idea,” Valade said. “Today, the process is sometimes the reverse: there are certain designers who start with the materials at hand – old collections, unused fabric hanging about, leftover bits of leather … and it inspires them,” she said.
Marc Jacobs works with Fabscrap, which recycles unused fabric to create insulation for products like furniture lining, or donates fabric to students and artists to use for their creations.
LVMH also has a partnership with WeTurn, which collects unsold clothing and material to recycle it into new thread and fabric.
Hermès said that in 2020 it sold 39,000 upcycled products. “The activities which destroy the most are fashion, leather goods and cosmetics,” said Cadart. Given the efforts undertaken and the current economic conditions, items are more often out of stock than lying about unsold.
“Since 2014, Hermès has thrown out almost nothing, everything flies off the shelves,” Cadart added.
At LVMH, Valade said “leather goods are, at the moment, in more of a situation of being out of stock” than not being sold.
She pointed to an upcycled Loewe bag made from scrap leather cuttings that sells for €1,700 (US$1,940) and which is currently out of stock.