Why did Burberry destroy 28 million pounds of its goods?

March 22, 2019 0 By HearthstoneYarns

On the topic of sustainability we are used to hearing brands over-producing
collections for their retail networks and being left with excess stock.
Back in March the New York Times broke the story that H&M was sitting on a
4.3 billion dollar mountain of unsold inventory. Enough items to dress an
entire nation.

But stories of luxury companies deliberately destroying their clothes in
order to manage inventory issues instead of discounting, adds another
dimension to the sustainability crisis that has come to define today’s era
of fast fashion, exclusivity and profitability.

According to Bloomberg the maker of the iconic trench coat physically
destroyed finished products worth 28.6 million pounds, as published in
Burberry’s latest annual report. If that number looks scary, it has nearly
tripled since 2014 when the cost of finished goods physically destroyed in
the year was 11 million pounds. In 2013 this was just over 5 million pounds.

The disposal of unwanted goods shows that Burberry’s turnaround effort
under new Chief Executive Officer Marco Gobbetti and designer Riccardo
Tisci remains challenging, states Bloomberg. It further notes it is a
matter of environmental concern to Burberry’s investors, with one asking
during Burberry’s annual meeting this week why shareholders couldn’t be
given the chance to buy the items.

Retaining brand equity is vital

Brands like Burberry, who operate multiple licenses across different
markets, have not always been in complete control when it comes to its
product releases. Factories in far away places could tamper with design
copyright, producing and releasing product via dubious distribution
channels. Hence, to retain brand equity, luxury companies decide to destroy
or buy back their collections to ensure it doesn’t re-enter the marketplace.

Richemont is an example of the latter, buying back unsold stock of
1,000-20,000 pound watches with the aim of dismantling and recycling
diamonds, spare parts or destroying luxury timepieces completely, according
to auctioneering house William George.

Luxury brands cannot be seen to be heavy discounters

Richemont destroyed nearly 500m pounds of its watches between 2016 and 2018
the Guardian wrote earlier this year, in order to avoid them being sold at
discounted prices.

Burberry last week confirmed it would reduce its retail prices in China,
following Louis Vuitton and Gucci. Perhaps reducing prices will have an
effect on how much volume it shifts and how much product is left at the end
of the season.

In a statement to Jing Daily the company said the pricing adjustment will
apply to categories from the ready-to-wear to bags and the average
reduction rate is around four percent.

“Burberry is very supportive of the decision to cut import duties on luxury
goods in China,” a company spokesman told Jing Daily. “The government’s
efforts are a clear positive for consumers. In response to this, we have
decided to lower prices on a range of our products in China.”

Photo credit: Burberry AW18, source Burberry website