French luxury houses give unsold items a second chance

Katell Prigent – Agence France-Presse

February 7, 2022 | 9:09

PARIS — In the extravagant world of the French luxury industry, brands preferred to destroy their unsold goods rather than offer their expensive products at a discount.

But the days of throwing away the coats, handbags and shoes ridiculed by shoppers after a new anti-waste law came into effect earlier this year are over.

Now, luxury houses are managing their inventory more carefully, making offers to staff, making donations and recycling goods.

“It’s a subject that has become important today,” said Julie El Ghouzzi, luxury expert at the consulting firm Cultz.

She pointed to the scandal that engulfed Burberry in 2018 after the British luxury brand revealed it had destroyed 28 million pounds ($38 million, 34 million euros at the current exchange rate) of unsold goods in 2017, the equivalent of 20,000 of its trench coats. .

Following the firestorm triggered by the revelation, Burberry announced that it would end the practice from the following year.

Markdowns to move goods are not an option in the luxury sector, as lower prices can hurt the attractiveness of their brands, which thrive on their elite status.

“In the luxury sector, if the price is lower, so is the desire to buy it,” explains El Ghouzzi.

Mindsets have changed

Luxury houses are now paying more attention to the subject, said Arnaud Cadart, portfolio manager at Paris-based asset manager Flornoy.

“Attitudes have changed, we are no longer in an economy that values ​​unbridled creation above all else,” he said.

The “if it doesn’t work, we’ll destroy it” mentality is also gone, Cadart said.

Now, luxury houses are trying to refine their stocks.

The Kering group, owner of the Gucci, Saint Laurent and Balenciaga labels, among others, has invested in artificial intelligence to better manage its stock.

At rival LVMH, the world’s largest luxury group that includes Louis Vuitton, Dior and Céline among many others, environmental development director Hélène Valade said “the luxury business model is tightly tailored to demand.” with low levels of inventories held by companies. .

Nevertheless, she acknowledged that the new law will push luxury houses to know even more about their customers to better anticipate their purchases and thus reduce stocks to a minimum.

El Ghouzzi said Louis Vuitton is already good enough to keep up with its stock.

“They know exactly what they have in stock and are able to manage it down to the millimeter,” she said, adding that “many other homes don’t do that.”

When there are still unsold items, reselling them to staff at favorable prices is an option. These large fashion groups have large workforces, with more than 150,000 employees at LVMH, 38,000 at Kering and 16,600 at Hermès.

Charitable donations are another option.

LVMH has a partnership with Cravate Solidaire, an association that collects donations of professional clothing and makes them available to people from disadvantaged backgrounds looking for work.

Upcycling

Designers have also started using discarded or unused materials, a practice often referred to as upcycling.

“Before, a designer with a brilliant idea would go and look for materials to realize his idea,” LVMH’s Valade told AFP.

“Today, the process is sometimes reversed: there are certain designers who start from the materials at hand: old collections, unused fabrics lying around, leftover leather… and that inspires them,” she says.

Such was the case of the late American designer Virgil Abloh, who was the artistic director of Louis Vuitton’s men’s collection from 2018 until his death in 2021.

Marc Jacobs in New York works with Fabscrap, which recycles unused fabric to create insulation or products like furniture lining, or donates it to students and artists to use in their designs.

LVMH also has a partnership with WeTurn, which collects unsold clothing and materials to recycle them into new yarns and fabrics.

Hermes said that in 2020 it sold 39,000 recycled products.

“The biggest destroyers are fashion, leather goods and cosmetics,” portfolio manager Cadart said.

Given the efforts undertaken and the current economic conditions, items are more often out of stock than unsold.

“Since 2014, Hermès has thrown away almost nothing, everything flies off the shelves,” added Cadart.

At LVMH, Valade said, “leather goods are, at the moment, more in a situation of out of stock” than of no sale.

She pointed to a recycled Loewe bag made from scrap leather that sells for 1,700 euros and is currently out of stock.

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