Dead Inventory and the Case for Customisation

March 8, 2022
 Min Read


Despite the fact that consumers are buying fewer new apparel items than in the past, the choice in most big name fashion stores is staggering. Constant promotional activities try to prompt consumers to part with their cash, but still, the sale rails strain under the weight of stock that has simply not sold at full price.

One of the most common metrics used by fashion retailers to determine the success of a season’s stock is full-price sell-through. This basically means the percentage of units sold at full price.Though this varies according to factors such as garment, brand, and season, a good industry standard is 60%. The remaining 40% is expected to sell at markdown. But what happens when that 40% fails to shift?

Well, what doesn’t sell goes back to a warehouse somewhere, or languishes in a stockroom. Dead inventory.

Dead inventory is a plague upon the fashion industry. Primarily, it ties up working capital. Every penny spent on product that becomes dead inventory could have been used elsewhere, to improve the business, to source more productive inventory.

The true value of dead inventory exceeds face value. If you take into account the brand’s margin, a £40,000 dump of dead inventory could actually cost the brand £100,000 in lost retail sales, and potentially a further £60,000 in gross margin.

In the US alone, it is estimated that dead inventory is costing the retail industry $50bn a year.

So what is the answer?

Rather than trying to address the amount that consumers are buying, instead the solution lies in taking a long hard look at how much retailers are purchasing. Fashion needs to get lean or die trying.

The abundance of apparel in stores reflects a state of desperation. Retailers clearly have little idea what trends are going to be popular with customers, so they buy everything they imagine will work and hope for the best. Anxious about what will happen if they run out of stock, the retailer also over-buys. It’s all there, ready and waiting. But the threat of dead inventory looms overhead all the time.

How much do retailers really need to produce?

What if, instead of filling stores with large swathes of items for consumers to cherry pick from, retailers picked a core offering, assessed what was working, and only produced in accordance with that? It could be, at least initially, a more expensive move, requiring a rush of work once the product hits the shelves, but in terms of minimising the loss from dead inventory, it could prove less costly over time.

Even better, what if they were to radically decrease dead inventory by offering more customisable product? By offering a preset range of fabrics to be interchanged with a set of styles or garment-types, and allowing customers to pick their own product using online software, the benefits are twofold (at least).

Firstly, as product is made to order, any excess stock is automatically eliminated. You are giving the customer exactly what they want.

Secondly, knowing what they are going for is key for informing future collections. You can pre-release suggestions online, let customers tell you what they would order, and order in prefab product to meet those specs.

To follow on from this second point, it is not necessary to convert an entire brand to customisation. By continuing to order prefab product alongside the option for customised complementary garments, the retailer can benefit from both mass production and mass customisation. Not only that, but in this era where omnichannel is the absolute buzzword, customising product lines allows brands to more accurately deliver precisely what customers want.

And by delivering what the customer wants, you build brand trust and reputation, and thus repeat purchasing. It is a cross-channel strategy that takes the in-store experience online, driving convenience for the consumer as much as stoking the fire of excitement for the product in that consumer’s mind.

Customisation is the future-proof strategy for a retail industry being strangled by the spectre of dead inventory. The figures make it clear that this excess of stock is not sustainable, and has the potential to devastate brands if no viable solution is enacted. It’s time to trim the fat, stop confusing customers with choice overload, and finally just give them exactly what they want

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