What to do with unsold apparel? A thorough explanation of how to liquidate inventory and alternative ways to make use of unsold items

In the apparel industry, seasons and trends change quickly, so unsold inventory is an unavoidable problem that has become a source of worry for many businesses. There are many issues that cannot be solved by simply clearing inventory, such as the difficulty of forecasting, deviations from sales plans, and damage to brand value due to price cuts.

This article will comprehensively explain the root causes of unsold goods, common methods of disposal, and alternatives such as the secondhand market and cross-border e-commerce. Find hints on how to turn unsold goods into business opportunities rather than treating them as "loss."

Why do unsold items occur in the apparel industry?

The occurrence of unsold goods in the apparel industry is due to a complex intertwining of the difficulty of forecasting, market fluidity, and structural sales issues. Here, we will organize the background and causes of the industry-specific risk of unsold goods from three perspectives.

Difficulty in forecasting and trend fluidity create inventory risk

In the apparel industry, trends change very quickly and consumer tastes are diversifying. This makes it difficult to predict demand in advance, and mistakes in purchasing and production decisions lead directly to unsold goods.

For example, the following cases occur frequently:

・Demand drops during the spring/summer sales period due to sudden bad weather

・Trends change suddenly due to the influence of social media and influencers

・New trends emerge before the end of the season, causing old products to suddenly stop selling.

This is a characteristic of apparel inventory: if you miss the timing, the value of the products will plummet.

The cause is overproduction and a deviation from sales plans.

In the SPA (specialized retailer) model, which produces products based on sales forecasts, there is a tendency for "overproduction" to occur, where more products are made than expected. In the case of wholesale and consignment sales, there is also a risk of inventory being returned due to deviations from sales plans.

The main factors that cause unsold stock include:

- Excessive safety stock

・The timing of sales promotion is not linked to the sales plan

・Increased headquarters inventory due to returns that are not sold through certain channels

The underlying reason is that deviations from plans have an impact on the entire supply chain, leading to a buildup of inventory.

Structural issues that make it difficult to sell out through price cuts alone

When inventory is backlogged, many companies take the approach of "reducing prices." However, if price reductions become a regular occurrence, it can lead to a decline in brand value and a loss of price trust. Not only that, but there are also an increasing number of cases where unsold goods are not resolved.

What are the limits of price reduction?

・Even if you lower the price, you won't be able to sell the products if there is too much stock.

・Customers will wait, thinking "it will get cheaper anyway."

・Price competition intensifies, worsening gross profit margins

As such, inventory disposal that relies solely on discounts runs the risk of being counterproductive in the long term.

Common ways to dispose of unsold apparel

In the apparel industry, there are several traditional methods for disposing of unsold goods. Many companies try to reduce inventory by using sales, lucky bags, or waste disposal, but each method has clear advantages and disadvantages. Here, we will summarize the most common disposal methods and provide a detailed explanation of each method, including the issues involved.

Sales and outlet discounts

The most common methods are end-of-season markdown sales and sales at outlet stores. While this is an effective way to get rid of large amounts of remaining inventory in a short period of time, the impact on brand image cannot be ignored.

Main features

Can be converted into cash in the short term

・It will be a trigger for customer inflow

on the other hand,

・Dependence on discounts due to frequent sales

・Damage to brand value

- Significant decrease in gross profit

There are also disadvantages such as the above. The reality is that if not implemented strategically, there is a risk of negative effects in the long term.

Organizing inventory for lucky bags and set sales

Another common way to clear out inventory is to package unsold stock into lucky bags or bulk sales, which allow products that would not sell on their own to be sold when combined with other items.

Advantages of this method

・You can dispose of unmoved inventory in one go

・Customers feel a sense of value and are highly satisfied

on the other hand,

・If popular products are not included, customers will be dissatisfied.

・You need a sense for how to put the set together

・Risk of remaining products being discarded

It can be said that the success or failure of a disposal method depends on planning ability.

Risks and impacts of waste disposal

Any remaining stock that cannot be disposed of may ultimately be disposed of, which may be convenient in the short term, but is a disposal method that entails many risks from legal, environmental and social perspectives.

Disposal risks

・Disposal costs incurred (processing and transportation costs)

・Decline in social evaluation of the brand (e.g., social media outrage)

・Increasing environmental impact (contradictions with sustainability)

In modern times, disposal is the last resort and a disposal method that should be avoided as much as possible.

Alternatives and new options for utilising leftovers

Unsold inventory is an unavoidable issue in the apparel industry, but rather than simply disposing of it, there is a need to shift to making use of it. Here, we will introduce in detail alternative methods to avoid wasting inventory and new initiatives that are attracting attention from the perspective of environmental considerations and new sales channels.

Collaboration with second-hand markets and reuse businesses

In recent years, the reuse market has expanded, and the apparel industry is also actively promoting reuse. Products in particularly good condition can be quite valuable in the secondhand apparel market.

Key points for utilizing the second-hand market

・Use of CtoC platforms such as Mercari and Rakuma

・Bulk purchase by reuse businesses for corporations

・Partnerships with specialized buyers for each brand

Through these efforts, it becomes possible to redistribute valuable products, thereby reducing inventory loss and generating profits.

Converting inventory into cash using B2B buyers

For companies that wish to dispose of their inventory in one go, it is effective to use a used clothing purchasing service for corporations. By purchasing at market price and dealing by lot, you can turn your inventory into cash with minimal effort.

Advantages of BtoB purchasing

- Excess inventory can be quickly disposed of

- Fair assessment for each product and brand

・Recovery as sales without incurring disposal costs

In addition, by considering how we dispose of items after purchase (domestic resale, export overseas, material recycling, etc.), we can minimize our impact on the environment and society.

Disposal that contributes to society through donations and charity

Even if the inventory does not lead to sales, there are ways to utilize it from the perspective of contributing to society. A typical example would be donating it to NPOs, welfare organizations, disaster relief organizations, etc.

The effectiveness of this method

・The project is of great social significance and is evaluated as a corporate social responsibility activity.

・Reduce the psychological burden on employees regarding inventory disposal

In some cases, you may be eligible for tax benefits

It is important to think about utilizing unsold inventory as an action to increase corporate value, rather than simply "disposing of" it.

Possibilities for inventory distribution using overseas exports and cross-border e-commerce

You can find new demand for inventory that has not sold in the domestic market by shifting your focus to overseas markets. Since apparel products vary by country in terms of culture, climate, and trends, it is not rare for products that remain unsold in Japan to be in high demand overseas. Here, we will explain in detail how to make effective use of inventory by utilizing overseas exports and cross-border e-commerce.

Stimulating demand through exports to emerging countries

In emerging countries in Southeast Asia, Africa, and Central and South America, there is an increasing need for high-quality, low-cost Japanese-made clothing. By targeting these markets, it is possible to make effective use of unsold inventory.

The benefits of emerging exports

・Products that are in demand all year round (T-shirts, jeans, etc.) are particularly easy to sell.

- Transportation costs are relatively low, making it suitable for large-scale disposal.

・It will lead to the creation of a sustainable brand image.

However, consideration must also be given to design constraints imposed by local culture and religion.

Long-tail sales strategy using cross-border e-commerce

Cross-border e-commerce is an online channel that sells Japanese apparel products directly to general consumers overseas. Through Rakuten Global, Shopify, eBay, etc., you can find demand for even niche products.

Characteristics of cross-border e-commerce

・Inventory can be recovered little by little through "direct sales to consumers"

- Able to handle sales in areas with opposite seasons (e.g. Southern Hemisphere summer)

・Inventory management becomes more efficient with the introduction of an EC system

On the other hand, there are challenges such as language support, currency management, and establishing a logistics system, so advance strategy planning is required.

Key points regarding regulations by country and region

When exporting overseas or engaging in cross-border e-commerce, it is essential to deal with the different systems that each country has, such as import/export regulations, tariffs, certificates of origin, and quarantine and hygiene regulations for clothing.

Points to note when responding

・Regulations regarding materials and ingredient labeling (EU, US, etc.)

・Brand copy and intellectual property management

・Check whether the product is prohibited from import in each country

By accurately understanding these points and working in cooperation with specialist companies and customs brokers, smooth distribution without any trouble can be achieved.

Introducing a service that helps solve apparel inventory problems

Disposing of unsold inventory and making effective use of it requires specialized know-how and networks. Recently, many services have emerged that offer functions such as purchasing inventory, supporting exports, and dealing with sustainability, helping to resolve inventory issues in the apparel industry. Here, we will explain how to use these representative services and what to consider when selecting one.

Use of specialized companies that purchase inventory and provide export support

By utilizing inventory purchasing companies and export support services that specialize in apparel, you can create a system that efficiently converts unsold goods into cash and distributes them to overseas markets.

Features of services that can be utilized

・Buy excess inventory in bulk by brand and lot

・Support for exports to emerging countries by businesses with overseas sales channels

・Data-based sorting and pricing support

This makes it possible to reduce disposal costs and improve cash flow at the same time.

Examples of services that support environmentally friendly inventory disposal

For companies that place importance on environmental considerations, it is important to introduce services that support sustainable inventory disposal. It is necessary to avoid disposal and design distribution based on recycling and reuse.

Representative initiatives

・Service to separate and recycle products by material

・Donate reusable clothing to welfare facilities and NGOs both in Japan and overseas

・ESG PR support (CSR report publication, media cooperation, etc.)

Through this support, an increasing number of companies are aiming to dispose of their inventory in a balanced manner in terms of the three aspects of "environment, society, and economy."

We provide a wide range of services, from collecting and purchasing used clothing to recycling.

We offer flexible services to handle the backlog and remaining inventory of apparel manufacturers. We provide optimal services based on the know-how we have cultivated in the used clothing industry.

Introducing our corporate services

OLD FLIP promotes the effective use of used clothing and sustainable initiatives through partnerships with companies. We provide a service for corporations that purchases the remaining stock of apparel manufacturers and second-hand clothing stores in bulk and redistributes the items in a valuable form.

Our strength is not just to dispose of inventory, but to contribute to society as part of our SDGs activities. Through the reuse of old clothes, we aim to build a partnership that contributes to environmental friendliness and the creation of a sustainable fashion culture.

We also actively undertake joint projects and launch new businesses with partner companies, seeking to create new value by leveraging each other's technologies and know-how.

We are always looking forward to hearing from companies that support this initiative to breathe new life into old clothes. Please feel free to contact us using the email form here for business partnerships or consultations.

A remake service that breathes new life into old clothes by dyeing them black

The fabric is still strong, but the color is fading. Your favorite clothes have changed color. Do you have old clothes like that?

Even for items that are difficult to purchase, we offer a service that transforms them into valuable items through "black dye remake."

In collaboration with Kyoto Montsuki Co., Ltd., a long-established company in Kyoto, these items are dyed a deep black to create attractive, one-of-a-kind items. For a more sustainable society, we offer the option of re-dyeing your favorite clothes through black dyeing so that you can treasure them forever.

Dirty old clothes can be reused with cleaning services

Even if your clothes are in poor condition and difficult to use, we can restore them to a reusable state through our unique cleaning service.

Even clothing with strong stains, odors, or mold can be restored to a usable condition through specialized processing using highly skilled techniques.

We can also wash stuffed toys, kimonos, and dresses. You can also leave high-end clothing and leather items such as fur, which are said to be difficult to clean, to us. We will not waste your precious clothing, but will pass it on to the next stage in a sustainable way.

Proposal for setting up used clothing collection boxes for items that are difficult to purchase

Even if the items are difficult to collect, they can be collected in used clothing collection boxes that have been set up as a way to contribute to the local community. Even damaged or heavily soiled clothing can be reused as a resource, so this is gaining attention as an option to avoid throwing away clothing.

We can also set up the machines in homes, facilities, and stores, and can also be used for local collection activities. We are also receiving more inquiries from organizations that wish to participate in SDGs and eco-activities, which will also contribute to society through collection.

We are particularly focusing on collecting used clothing from Uniqlo and GU, which are difficult to put a price on.

summary

The problem of unsold items in the apparel industry is an unavoidable issue due to several structural factors, such as the difficulty of forecasting, overproduction, and a reliance on price reductions. Generally, the industry disposes of unsold items through sales, outlet sales, and lucky bags, but these can also cause new problems such as damage to brand value and environmental impact.

Therefore, there is a growing trend to reuse inventory as an "asset" rather than a "loss" through the use of the reuse market, B2B purchasing, cross-border e-commerce, donation activities, and the introduction of specialized services such as OLD FLIP. In order to achieve both sustainable inventory management and profitability, companies need to proactively adopt these new options.