Last week, Burberry’s annual report revealed £28.6 million ($38 million) worth of stock was sent to be incinerated last year. The news has left investors and consumers outraged but comes as little surprise to those in the fashion industry.
The practice of destroying unsold stock, and even rolls of unused fabric, is commonplace for luxury labels. Becoming too widely available at a cheaper price through discount stores discourages full-price sales and sending products for recycling leaves them vulnerable to being stolen and sold on the black market. Jasmine Bina, CEO of brand strategy agency Concept Bureau explains, "Typically, luxury brands rally around exclusivity to protect their business interests - namely IP and preservation of brand equity." She stated she has heard rumors of stock burning but not specific cases until this week. Burberry does engage in a limited amount of cut-price selling through 54 outlet stores worldwide in comparison to their 449 directly operated full-price stores.
Another reason for the commonplace practice is a financial incentive for brands exporting goods to America. U.S. Customs and Border Protection states that “if imported merchandise is unused and exported or destroyed under Customs supervision, 99% of the duties, taxes or fees paid on the merchandise by reason of importation may be recovered as drawback.”
It is incredibly difficult to calculate how much deadstock currently goes to waste as while there are incentives to do it, there’s no legal obligation to report it. As such, most of it remains hearsay.
A source, who chose to remain anonymous, shared her experience working in a Burberry showroom in New York in October 2016. “My job, with many other people, was to toss every single piece in boxes from hundreds of racks so they can send it to burn the unsold collections. It was killing me inside because, as a vegan, seeing all that leather and fur went to waste and these animals had to die for nothing. I couldn’t stay there any longer, their business practices threw me off the roof.” In May this year, Burberry announced it was taking fur out of its catwalk shows and reviewing its use elsewhere in the business. “Even though we asked the management, they refused to give us detailed answers why on earth would they do this to their collection,” the source, who left the role within two weeks, continued. She has since worked with another high-profile, luxury label that she was horrified to discover shreds dead stock over recycling it but declined to name them for concern of being identified.
In a Quora post from 2013, which asked if it’s true that Louis Vuitton burns its bags, Ahmed Bouchfaa, whose profile claims he works for Louis Vuitton and whose LinkedIn profile confirms he was an IT business analyst with them between 2009 and 2010, responded that the brand holds sales of old stock for staff members twice a year. Items which have still not sold after several sales, he stated, are destroyed. “Louis Vuitton doesn't have sales (at least not public sales). They either sell a product at a given price or discontinue it. This is to make sure that everybody pays the same price for an item,” he says. He goes on to disclose the strict guidelines around the employee sales: “You may buy gifts for someone, but they track each item, and if your gift ends up in Ebay they know who to ask.” One investor commenting on the Burberry figures was reportedly outraged that the unsold goods were not even offered to investors before they were incinerated.
In an article published in sustainable fashion campaigners Fashion Revolution's zine, Christina Dean of Redress exposed the issue, writing, "We know that around 100 billion garments are manufactured annually. Let’s say the sell-through rate (both full and discounted) is a generous 90%, then potentially 10 million items of clothing become ‘deadstock’ every year. That’s a lot of clothes to miraculously make ‘disappear.’"
Richemont, who own brands including Cartier and Montblanc, also hit the headlines in May for taking back £437 million ($572 million) of watches for destruction in the last two years to avoid markdown prices. It’s not just luxury brands either. In October last year, a Danish TV show, Operation X, exposed H&M for burning 12 tonnes of unsold clothing since 2013. In a statement, the high street retailer defended itself by saying that the incinerated clothing had failed safety tests: “The products to which the media are referring have been tested in external laboratories. The test results show that one of the products is mold infested and the other product contains levels of lead that are too high. Those products have rightly been stopped in accordance with our safety routines.” In March, a report revealed that H&M were struggling with $4.3 billion worth of unsold stock. The brand told the New York Times that the plan was to reduce prices to move the stock, arguably encouraging consumers to buy and throw away with little thought. H&M is one of the most vocal high street brands on sustainability, with in-store clothing recycling bins, a 'conscious collection' made from more environmentally-friendly materials and yearly reports outlining their ambitious plans such as being 100% climate positive by 2040.
Overproduction is perhaps the biggest concern for Burberry. While there has been much outrage at the elitist connotation of burning goods rather than making them affordable, executives at the British fashion house are no doubt struggling to defend how they miscalculated production. The wastage has been put down to burning old cosmetic stock to make way for their new beauty range now being produced by Coty. However, while the value of destroyed stock is up from £26.9 million last year, it’s an even more significant increase from 2016’s figure of £18.8 million, highlighting that this is an ongoing issue.
In September 2016, Burberry switched to a "see now, buy now" catwalk show format. The move was a switch to leverage on the coverage of their fashion week show to make stock available immediately to consumers, rather than the traditional format of presenting to the industry, taking orders for production and becoming available to shop in six months’ time. While Burberry announced "record-breaking" online reach and engagement, there has been little evidence to suggest the strategy has had a significant effect on sales, particularly as the hype slows across the season. In February they made adjustments to the format, dropping some catwalk items immediately and promising that others would launch in the coming months.
In a statement, Burberry denied that switching to “see now, buy now” has had an impact on waste. A Burberry spokesperson further said, “On the occasions when disposal of products is necessary, we do so in a responsible manner and we continue to seek ways to reduce and revalue our waste. This is a core part of our Responsibility strategy to 2022 and we have forged partnerships and committed support to innovative organizations to help reach this goal.”
One such partnership is with Elvis & Kresse, an accessories brand working with reclaimed materials. Co-founder Kresse Wesling said, “Late last year we launched an ambitious five-year partnership with the Burberry Foundation. The main aim of this is to scale our leather rescue project, starting with off-cuts from the production of Burberry leather goods. We are working tirelessly to expand our solutions and would love to welcome anyone to our workshop, to come and see what we are doing." Though, at the moment, the partnership only addresses waste at the production stage and not unsold goods. Additionally, Burberry is also working with the Ellen MacArthur Foundation on circular economy initiatives.
While these are honorable schemes, it makes it harder for Burberry to defend these latest figures. Fifteen years ago, Burberry was at crisis point as their signature check pattern was widely replicated by cheap, imitation brands, deterring luxury consumers who found their expensive clothing more closely associated with working-class youth culture than a prestigious heritage fashion house. In the year 2004/2005, at the height of overexposure of the Burberry check, the brand’s turnover was £715.5 million. Under Christopher Bailey as creative director and Angela Ahrendts as CEO, appointed in 2004 and 2006 respectively, they turned the brand around and this past year revenue hit £2.73 billion. Ahrendts left the company to join Apple in 2013 and Christopher Bailey left last year, handing over the reins to Ricardo Tisci who will present his first collection for the brand at London Fashion Week in September.
Bina believes that in 2018, brands need to readdress their exclusivity tactic. "Exclusivity is starting to be challenged," she says. "I think that goes hand in hand with how luxury itself is being challenged. Access, and those brand who police it, are becoming less and less relevant. Things like health, enlightenment, freedom, social and environmental responsibility - these are the new luxuries, and they all come from within, not without. That's the challenge that traditional luxury brands will have to contend with in the mid-to-long-term future."
This, and the pressure to balance stakeholder demands with adhering to their sustainable promises, are the challenges facing Marco Gobetti, CEO since January 2017, and Tisci.
