In the extravagant world of the French luxury industry, brands used to prefer destroying their unsold goods rather than offering their high-priced products at a discount.
However, gone are the days of binning the coats, handbags and shoes pooh-poohed by shoppers after a new anti-waste law came into force at the start of the year.
Now luxury houses are managing their stock more carefully, offering deals to staff, making donations and recycling goods.
Photo: Bloomberg
“It’s a subject that has become important today,” said Julie El Ghouzzi, a luxury goods expert at the Cultz consulting agency.
She referred to the scandal that engulfed Burberry Group PLC in 2018 after the British luxury brand disclosed that it had destroyed £28 million (US$37.91 million) of unsold goods in 2017 — the equivalent of 20,000 of its trench coats.
Following the firestorm the revelation triggered, Burberry announced that it would halt the practice starting in 2019.
Markdowns to move goods are not an option in the luxury business, as lower prices can undermine the attractiveness of their labels, which thrive on their elite status.
“In the luxury sector, if the price tag is lower, so is the desire to buy it,” El Ghouzzi said.
Luxury houses are paying more attention to the subject now, said Arnaud Cadart, a portfolio manager at Paris-based asset manager Flornoy & Associates.
“Mentalities have changed, we’re no longer in an economy that values unbridled creation above all else,” he said.
Also gone is the mentality that “if it doesn’t work we’ll destroy it,” Cadart said.
Now luxury houses strive to fine-tune their stocks. Kering SA, which owns the Gucci, Saint Laurent and Balenciaga labels, among others, has invested in artificial intelligence to better manage its stock.
At its competitor LVMH Moet Hennessy Louis Vuitton SE, the world’s largest luxury group — which includes Louis Vuitton, Dior and Celine among many others — environmental development director Helene Valade said: “The luxury business model is closely adjusted to demand,” with low levels of stock being held by the firms.
Nevertheless, she acknowledged that the new law pushes luxury houses to learn even more about their clients to better anticipate their purchases and thus reduce stocks to a minimum.
El Ghouzzi said Louis Vuitton does an excellent job of keeping track of its stock.
“They know exactly what they have in stock and are capable of managing it down to the millimeter,” she said. “That’s not the case in many other houses.”
When there are nevertheless unsold goods, selling them to staff at advantageous prices is one option. These large fashion groups have large numbers of employees, with more than 150,000 at LVMH, 38,000 at Kering and 16,600 at Hermes.
Gifts to associations are another option. LVMH has a partnership with Cravate Solidaire, an association that collects donations of professional clothing and provides it to people with disadvantaged backgrounds trying to land jobs.
Designers have also begun to make use of discarded or leftover materials, a practice often called upcycling.
“Previously, a designer with a brilliant idea would go search for materials to realize their idea,” Valade said.
“Today, the process is sometimes the reverse. There are certain designers who start with the materials at hand — old collections, unused fabric hanging about, leftover bits of leather ... and it inspires them,” she said.
This was the case for late US designer Virgil Abloh, who was the artistic director of Louis Vuitton’s menswear collection from 2018 until his death last year.
Marc Jacobs in New York works with Fabscrap, which recycles unused fabric to create insulation or products such as furniture lining, or donates it to students and artists to use for their creations.
LVMH also has a partnership with WeTurn, which collects unsold clothing and material to recycle it into new thread and fabric.
Hermes said that in 2020 it sold 39,000 upcycled products.
“The activities which destroy the most are fashion, leather goods and cosmetics,” Cadart said.
Given the efforts undertaken and the current economic conditions, items are more often out of stock than lying about unsold.
“Since 2014, Hermes has thrown out almost nothing, everything flies off the shelves,” Cadart said.
“Leather goods are, at the moment, in more of a situation of being out of stock” than not being sold, Valade said.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
As they zigzagged from one machine to another in the searing African sun, the workers were covered in black soot. However, the charcoal they were making is known as “green,” and backers hope it can save impoverished Chad from rampant deforestation. Chad, a vast, landlocked country of 19 million people perched at the crossroads of north and central Africa, is steadily turning to desert. It has lost more than 90 percent of its forest cover since the 1970s, hit by climate change and overexploitation of trees for household uses such as cooking, officials say. “Green charcoal” aims to protect what