By Paul Soong, Regional Director, ANZ, E2open
Deadstock has long been a challenge in the retail industry. Many businesses have jumped on the trend of fast fashion, employing speedy design-to-sale practices and rapid stock turnover – resulting in more than half of the 380 000 tonnes of textile products imported each year in landfill.
Coupled with major imbalances in stock caused by the current unpredictable nature of the supply chain, deadstock is piling up worse than ever before. Yet, there is an opportunity for retailers to optimise their unsold goods through the implementation of sustainable practices that meets the growing expectation from consumers.
Factors contributing to increasing levels of deadstock
Prior to the pandemic, the fashion supply chain was operating at a flying speed. Retailers’ rapid release rates of new collections fed into shoppers’ desires to buy more. Despite alarming levels of deadstock emerging, companies still found it cheaper to double volumes with a factory and deal with the excess stock later.
However, the rising costs and increasing uncertainty due to COVID-19 variants impacted New Zealanders’ appetite to spend. Consumer confidence dropped 3.6 points to 99.1 in the Westpac Bank-McDermott Miller Consumer Confidence Survey (December quarter). This loss in confidence forced businesses to pull back on their newly established transport and stock operations and adjust to the reduced demand. As a result, retailers are now experiencing an overload of excess stock like never before, with attempts to receive goods on time through premium prices not paying off.
Sustainability driving consumer choices
What was even more compelling than these extreme swings in consumer demand, was that fast fashion tactics were no longer driving purchasing choices post-pandemic. Many New Zealanders are now displaying a trend towards buying goods if they are sourced sustainably.
Sustainability is rated as an important purchase criterion for New Zealanders. The Global Sustainability Study 2021 (Simon Kucher & Partners) of more than 10,000 people across 17 countries, identified 85% of people have shifted their purchasing behaviour to being more sustainable over the past five years. 32% of Millennials significantly changed their behaviour towards being more sustainable and one third are choosing a sustainable alternative when available.
For many consumer-facing companies, this meant that excessive stock and poor inventory management had to be minimised and put under control.
Transforming deadstock for sustainable purposes
Retailers can start looking beyond the supply chain and shopping challenges and focus on optimising their deadstock to showcase their commitment to sustainability. Sustainability can even help retailers overcome the current unpredictable supply and demand fluctuations.
Some key strategies that retailers can adopt are:
1. Source deadstock fabric
Using deadstock in clothing production can be a direct way to curb waste as it not only reduces the process of producing new materials but can transform unsold goods into potential profits. Purchasing these fabrics also come at a much lower price than producing new textiles. In addition to these materials being significantly cheaper than non-recycled goods, it also improves trust in the consumer relationship by providing transparency on where their clothes are sourced, in turn, boosting their sustainability profile.
2. Develop a good supplier relationship
Having a poor relationship with a supplier or not regularly communicating with them can result in missed or delayed orders. This can lead to a loss of sales and increase in deadstock as the goods miss the period of consumer demand. Developing a positive relationship with suppliers requires strong loyalty as a customer, as well as clear communication to ensure all parties’ needs are aligned. If this is not achieved, there is a risk that the supplier will not put your needs as a priority. In a situation where stock may be in a surplus or deficiency and the supplier needs to alter an order, they may not feel as obligated to put in the extra effort.
3. Implement intelligence and software tools
Reduce current and future overstock in the first place by investing in up-to-date and accurate technology that can provide retailers greater visibility across their supply chain operation – from inventory to customer status. Technology, such as integrated cloud-based platforms of applications with connected networks and data will help to improve inventory management. AI tools that enable real-time visibility into orders, shipments, and consumer purchasing provide real-time insights that retailers can use to determine how much stock they need and when. This, in turn, will increase efficiency, lower operational costs and help anticipate stock levels to match consumer demand.
Nailing an efficient and sustainable deadstock process is more important than ever for retailers to optimise their unsold goods and ensure they are being utilised from end-to-end.”