Excess Inventory Woes

Has anyone else recognized all of the clearances going on in the Apparel industry right now?


“New Winter Outlet Restock Sale!”


The “We Made Too Much” Clearance


“Early Black Friday Sales”



This is coming from small brands, big brands and HUGE brands across multiple segments of the industry and unfortunately, it comes as no surprise.


Inventory is threatening everyone’s end of year budget, and it’s imperative that all of those negative numbers in ledgers get remedied as soon as possible. Selling through units at a clearance price, taking a short margin and moving through inventory quickly has clearly become a widely adopted solution. The consumers are greatly benefiting from this issue, but what are all of the apparel brands out there doing to make sure this doesn’t happen again in the future?


In 2020, when the world basically shut down for many months, it was not possible for manufacturing to proceed. Orders that were on the books were completely stopped. Items that were in high demand flew off the shelves with no restocking plan in sight. Inventory was completely depleted in several segments.


When production started back up again, and we started to see a replenishment of inventory in the stores and online, consumers responded with a drastic increase in demand. The best example of this was toilet paper. People all over the country were snapping photos of empty shelves in grocery stores. The stress of not knowing if you would have enough in your house to get through to the next time you could find more paper goods was creating chaos. And when toilet paper showed back up in stores, so many customers tried to buy every package they could get their hands on, to ensure that feeling would never happen again. This is what led to restrictions on how many rolls or packages you could buy at a time, which then stayed in place for many months as an intermediate measure.


Demand skyrocketed as an overcompensation for all of these issues, but supply did not meet demand. Fear led consumers to demand excess amounts of these types of products and companies had to respond.


The apparel industry and the furniture industry are a couple of other key sectors that were hit hard. Inventory from our retail stores was so low for too long. Items were on backorder for months, and all we heard from our customer was, “When are you going to get more?” So we pushed to fulfill that need and most of us sold out again!


Then came the tricky part. Each company had to make a bet: Was demand going to remain high for another year? Was demand going to regulate itself back to normal? Or, was demand going to go way back down after we fill this current spike in demand?


There was no good answer here. I don’t know that many could have gotten it right, nor do I believe that any company truly got it wrong. Every path forward was a risk.


For those companies that chose to believe that demand was going to plummet, they lowered their seasonal or annual purchase and continue to struggle with fulfillment today. They continue to miss out on potential sales, but they also don’t have negative numbers on their books in the form of excess inventory.


The companies that hoped demand would level back out to traditional quantities probably came out in the best shape, but it’s important to realize that we are all living in a new normal now. So looking at historical numbers from 2018 and 2019 was genuinely a huge risk.


Last but not least is the group that chose to (beautifully optimistically) hope that demand would remain high. These brands increased and sometimes doubled their buy, but demand did not remain high, like they’d hoped. Millions of people are feeling the effects of inflation issues, and are being very intentional with the dollars they spend. And for those who are still spending, demand and purchasing power in 2022 has been directed so much more toward getting back out of our bubbles. In 2020 and 2021, people were spending any expendable dollars on furniture to fix up their houses while they were in them 24 hours a day and on fitness apparel to get in shape and workout more. Now, they’re spending those dollars on vacations and experiences that they missed out on for the last two years.


So what can apparel brands do? Each unit sitting in their facility, not being sold to a customer is a red line on their annual budget. They have to get rid of that inventory, and they want to get rid of it before Q1 of 2023. So go shop their sales! Help them out and grab some great garments at an amazing price!


In the meantime, brands across the industry need to consider how to prevent this kind of rollercoaster of inventory issues in the future. I know that the pandemic created unforeseen and unprecedented issues, but there’s no guarantee that there won’t be another one in our lifetimes. Smart SKU Rationalization is one of the ways that brands can be smarter. Manufacturing key garments that people want to buy, simplifying your assortment and focusing your efforts on a true target customer could help to define a better way forward.


Are you rationalizing your line to make sure you’re protected in the future?





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