What Retailers Like Amazon Do With Unsold Inventory

Summary

Retailers and manufacturers face a staggering issue of excess unsold inventory, leading to billions of pounds of waste annually. Apparel waste is particularly concerning, with practices like burning unsold goods contributing to over five billion pounds of waste and significant carbon emissions in the U.S. alone. Online shopping exacerbates the problem with high return rates, often resulting in goods ending up in landfills due to complex reverse logistics. Companies like Amazon are taking steps to mitigate this through donation programs and improved inventory management, while the industry at large grapples with the need for more sustainable solutions.

Takeaways

• 🚮 Retailers and manufacturers face a massive issue of excess unsold inventory, often leading to billions of pounds of waste and significant carbon emissions.
• 🔥 The apparel industry, in particular, is notorious for burning unsold goods, contributing to environmental pollution and waste.
• 📈 Online shopping, especially through platforms like Amazon, has increased the rate of returns, which in turn adds to the unsold inventory problem.
• 🌐 Geographic disparities in waste management are evident, with the U.S. lacking a consistent recycling infrastructure compared to some European countries.
• 👔 The fast fashion industry is a major contributor to excess inventory, with trends leading to a rapid turnover of styles and high unsold rates.
• 🔄 Some companies are adopting circular economy practices, like incinerating clothes for energy recovery, to mitigate the environmental impact.
• 🛒 Innovative solutions like Amazon's Fulfilled by Amazon Donations program aim to redirect unsold inventory towards charitable donations.
• 🔄 Secondary markets and discount retailers serve as alternative channels for selling or donating unsold and returned items.
• 🤖 Technology and data analytics are being utilized to improve inventory management, reduce returns, and find better homes for returned goods.
• 🌱 Sustainability initiatives by companies like H&M and Patagonia are encouraging the reuse and recycling of clothing, promoting a more circular approach to fashion.

Q & A

What is the environmental impact of unsold inventory in the U.S.?

The environmental impact is significant, with over five billion pounds of waste generated annually, equivalent to the trash produced by five million Americans or the waste from 5600 fully loaded Boeing 747s.

Why is burning apparel a common practice among retailers?

Burning apparel is a way to manage excess inventory without flooding the market, which could devalue the brand. It also prevents the unsold items from being sold at a significantly lower price, which could undercut new product sales.

What percentage of clothing goes unsold in Germany according to the study mentioned?

According to the study, 10 to 20 percent of clothing goes unsold in Germany, amounting to an estimated 230 million items annually.

How does the online shopping trend affect the rate of returns and waste?

Online shopping leads to a higher rate of returns, which is 25 percent compared to 9 percent for in-store purchases. This increase in returns contributes to the accumulation of waste in the form of unsold and returned items.

What is the economic reason behind retailers disposing of returned items rather than reselling them?

The reverse logistics process for returned items is expensive and complicated. It often doesn't make economic sense to resell items that have been returned, especially if they are cheaper and used, leading to a higher likelihood of them ending up in landfills.

What is Amazon's Fulfilled by Amazon Donations program and how does it address waste?

Amazon's Fulfilled by Amazon Donations program makes donation the default option for sellers to dispose of unsold or unwanted products in Amazon warehouses. This initiative aims to reduce the amount of waste sent to landfills.

How does the lack of a regulated waste infrastructure in the U.S. impact retailers' waste management?

The lack of a regulated waste infrastructure in the U.S. means that retailers face an inconsistent and unregulated environment for waste and recycling, which can lead to inefficiencies and increased waste.

What is the role of 'fast fashion' in the apparel industry's excess inventory problem?

Fast fashion contributes to excess inventory as it leads to a rapid turnover of styles and trends, resulting in a large volume of unsold clothing. This excess often ends up in landfills due to the high rate of production and short lifespan of the garments.

How do some companies like H&M and Burberry deal with unsold inventory?

Companies like H&M and Burberry have incinerated unsold inventory to prevent it from flooding the market and devaluing the brand. However, some have shifted to more sustainable practices, such as H&M recovering energy from the incineration process.

What are some innovative solutions retailers are using to reduce waste from returns and unsold inventory?

Innovative solutions include using data and machine learning to better match customer preferences, optimizing next steps for returned items, implementing take-back systems, and using technology to predict customer demand and reduce overproduction.

How do programs like Amazon Warehouse and Prime Wardrobe help in reducing waste?

Amazon Warehouse sells renewed goods at a discounted rate, while Prime Wardrobe allows customers to try items before purchasing, reducing the number of returns. These programs help in reducing waste by finding alternative markets for returned and unsold items.