Discounts are unthinkable and destruction is now forbidden: Between millimeter-precise inventory management, staff sales, donations and recycling, the luxury brands organize themselves to sell unsold products.
“The big maneuvers have been going on for two years,” luxury expert Julie El Ghouzzi of the consultancy Cultz told AFP. The companies were preparing for the introduction of the recently enacted French law banning the destruction of unsold goods. In Germany, the government is still working on a statutory ordinance for the Circular Economy Act, which will oblige companies to no longer destroy new goods.
“The issue has become important today,” she adds, recalling the Burberry scandal in 2018. In its annual report, the British brand revealed that it destroyed over £28 million worth of goods in 2017 to protect its brand to protect – a sum equivalent to about 20,000 of their iconic trench coats.
There is no final sale in the luxury segment
After the announcement caused outrage, the company said it would end these practices the following year. The luxury houses are now “extremely cautious”, confirms Arnaud Cadart, portfolio manager at Flornoy to AFP, “the mentality has changed, we are no longer in an economic system in which unbridled creativity is paramount” and in which the idea is, “no matter how much waste, if it doesn’t work, it will be destroyed”.
Because in the luxury segment there is no final sale. The sale can pose “a problem of desirability,” according to Julie El Ghouzzi. “In this context, the first measure to be taken is strict stock management. The French fashion house Kering, which owns Gucci, Saint Laurent and Balenciaga, among others, says it is investing “in artificial intelligence technologies” for this purpose.
At its competitor LVMH, which owns fashion houses Louis Vuitton, Dior and Celine, Hélène Valade, director of environmental development, said that “the luxury model is already very much attuned to demand”, with low inventories. However, she admits that the new law will force houses to get to know their customers even better in order to adapt to demand.
For her part, Julie El Ghouzzi emphasizes that Louis Vuitton, LVMH’s main brand, is particularly strong in this area: they know exactly what they have in stock and are able to manage their stocks with millimeter precision This is not the case in other houses,” she emphasizes. If there are still unsold goods, one solution is to sell them to staff at reasonable prices: 150,000 employees at LVMH, 38,000 at Kering, 16,600 at Hermès; as well as donations to associations: LVMH has a partnership with Cravate Solidaire, the fashion house Kenzo with Tissons la solidarité, Marc Jacobs in New York with the association Fabscrap.
“Slumbering Fabrics”
And then there is the recycling of products into new raw material. “In the past, designers with an extraordinary idea would look for the resources to implement that idea,” Hélène Valade told AFP. “Today the process is sometimes reversed: there are some fashion designers who start with materials that already exist – old collections, fabrics that lie dormant in houses, leftover leather – and use them to develop their brilliant idea.” Virgil Abloh worked in this way at Louis Vuitton .
LVMH also signed a partnership with WeTurn, a start-up specializing in fiber recovery to make new yarn packages. At Kering, Balenciaga and Saint Laurent – for shoes – or Alexander McQueen have developed projects with Revalorem, a company that recycles unsold items from the luxury goods industry to extract raw materials from them. In 2020, Hermès launched 39,000 products made through upcycling.
“The practices that destroy the most products are found in fashion, leather goods and cosmetics,” explains Arnaud Cadart. But today, their excellent growth leads to scarcity rather than surplus. “Since 2014, Hermès has had practically nothing to dispose of, everything goes,” says Arnaud Cadart. At LVMH, Hélène Valade confirmed that “leather goods tend to sell out at the moment,” citing, for example, a Loewe brand bag made from leather leftovers from the workshops. And that despite a sales price of 1,700 euros. (AFP)
This article was previously published on FashionUnited.fr. Translation and editing: Barbara Russ