Is purposeful giving an answer to retail’s inventory glut?
Retailers across the U.S. forced to close stores due to the COVID-19 outbreak have watched their inventories pile up. The inventory to sales ratio in the country hit an almost 11-year high in March, according to a recent report by the Federal Reserve Bank of St. Louis. The situation is expected to look even worse when the April report is made public in the coming weeks, reports The Wall Street Journal.
Apparel retailers and brands with closed stores have resorted to a number of tactics to move excess inventory.
Kohl’s, among many (most) others, offered deep discounts to online shoppers. The net result was that the chain’s gross margin in the first quarter fell to 17.3 percent, down from 36.8 percent for the same period in 2019. Even at sharply lower prices, Kohl’s was unable to generate nearly enough volume to offset the loss of customer traffic in stores. In the end, the chain’s net sales fell 43.2 percent.
Others have chosen to repurpose existing inventory at a time of societal need. Banana Republic, Old Navy and Blade + Blue are among businesses that have used remnants from clothing typically sold on store racks to make face masks.
Some may be considering mothballing seasonal inventory from this year and take another shot at selling it in 2021.
Another option is for retailers to donate excess inventory to philanthropic organizations.
The arguments for taking this approach is that it helps fill a need made worse by the growing number of unemployed in the country. Government figures show 40.7 million have filed for unemployment insurance since mid-March. The resulting goodwill created with the public can help increase a brand’s equity in both the short- and long-term.
Benefits for this approach extend beyond clearing unwanted goods to free up space for current merchandise. Donating products can also be less expensive than other ways of moving excess inventory, while putting companies in the position to reap significant tax benefits, as well.
Shari Rudolph, chief development officer for Good360, a national nonprofit organization that matches retailer and brand donations with reputable charities, told RetailWire in an email exchange that corporate donors increased their contributions 150 percent year-over-year for March and April. Old Navy has partnered with Good360 to contribute over $30 million in goods to families in need. A program with Nike saw the brand donate its entire inventory of Air Zoom Pulse sneakers (30,000 pairs) to healthcare workers.
- Retailers: Inventories to Sales Ratio – Federal Reserve Bank of St. Louis
- Fashion Stockrooms Are Bursting at the Seams – The Wall Street Journal
- Is Kohl’s a stronger retailer as it reopens stores? – RetailWire
- Will face masks be a lifeline for apparel retail? – RetailWire
- Should fashion retailers mothball spring? – RetailWire
- Goods For The Greater Good – Good360
DISCUSSION QUESTIONS: Is purposeful giving a viable way for fashion brands and retailers to address the current inventory glut? Do you see right and wrong ways for companies to engage in activity of this sort at this time?