Luxury Stores Are Bursting With Unsold Stuff
Fashionistas can smell blood. Luxury brands need to find ways to unload their growing pile of unsold stock without reeking of desperation. The luxury industry is slowing as shoppers sober up after their pandemic spending spree.
In 2022, sales across the sector rose by 15% at constant exchange rates, according to Bain & Company estimates. But U.S. shoppers tightened their belts toward the end of last year, and Europeans followed this summer.
The Chinese haven’t been spending as much as brands hoped either since Covid-19 restrictions were lifted in January. This year’s growth rate is expected to be around half what the industry managed in 2022. The slowdown has left brands’ own stores, independent boutiques and e-commerce retailers stuffed with unsold stock.
The boss of online luxury goods seller MyTheresa said the company is experiencing “the worst market conditions since 2008," and had 44% more inventory by the end of its latest quarter than a year earlier. Burberry is buying back unsold products from department stores. Mainstream fashion chains have a ready answer to the problem of excess stock: deep discounts.
But luxury brands will never pile it high and sell it cheap because they are protective of their reputations for exclusivity. Adding to the challenge, one of their old tricks for making leftover inventory vanish—burning it—has become taboo. Earlier this year, EU countries voted to outlaw the incineration of fashion waste.
Luxury brands have spent the past few years diligently weeding out discounts. They have worked hard to pull products from independent retailers and websites that offer deep end-of-season price cuts. Prada, for example, has halved its reliance on wholesale accounts since 2018.
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