March 29, 2020
What Retailers Like Amazon Do With Unsold Inventory

What Retailers Like Amazon Do With Unsold Inventory

Every year, retailers and manufacturers end
up with billions of pounds of excess unsold inventory that they’re
sending straight to landfills. And for apparel, they often burn it. And it’s creating more than five billion
pounds of waste a year in the U.S. and over fifteen million
metric tons of carbon dioxide. That’s equivalent to all of the trash
produced by five million Americans a year, or fifty six hundred
fully loaded Boeing 747s. In Germany, a recent study found that
10 to 20 percent of clothing goes unsold, an estimated 230 million
items there each year. And the amount of inventory waste is
only growing as Amazon leads the way in bringing more shoppers online, where the
rate of returns is 25 percent, compared to just 9
percent for in-store purchases. Returns are piling up as walls
of shame in warehouses everywhere. We wanted to find out, why is this
problem so big and what are major players like Amazon doing to cut back
on the wasted inventory clogging our landfills and our planet? We have spoken to over 120 retailers and
over half of them have said that they are disposing of over 25
percent of their customer returns. It’s actually cheaper for them
to just throw them away. To understand why, you have to look
at the complicated journey a return item takes, from the moment you bring
it back, potentially all the way to a landfill. It goes back through a
distribution center where goods can sit for a while, and then they end
up going to liquidators and vendors, and then they get passed down to
smaller regional wholesalers, and then they go from there to dollar stores,
pawn shops, thrift stores, eBay, mom-and-pops at flea markets, and then
they get to consumers in certain cases. And when when goods are cheaper
and used and have to go through that whole process, often it doesn’t make
economical sense, so they end up in landfills. And other types of items,
if it’s larger, items like a used TV, going through that process, it has
a high likelihood of being damaged and destroyed and ends up
in a landfill as well. It’s this expensive, complicated reverse
logistics that keep more products from being resold or recycled. Most organizations don’t really inspect every
single item and say, is this resellable, is it not? What level of effort would it take
to get this back into a resellable condition? And that’s why companies take kind
of the easy route out and just say, well, let’s
just destroy this. And that way we can do that in bulk. And it’s not taking up valuable
time and resources from the organization that has to do other things. And some types of products can’t
be resold, like open, over-the-counter medicines. And some simply have no resale
value, like DVDs sold on the international market. Any DVD, once it’s
returned, the resale value is negligible to zero. And so in those cases, you didn’t want
that to flood the market and become a a zero price point to
compete with your brand new product. But at the same time, you didn’t
want to pay for it to return. So in those cases, we had markets
where it was 100 percent in market destruction, meaning we didn’t take
a single unit back. Amazon and other retailers won’t publicly
disclose how much inventory they destroy. Let’s acknowledge just for a fact
that there’s a lot of product waste. Obviously, that’s true. We know that companies are getting rid
of a lot of products because they’re either out of date or
they don’t work, they’re unfixable. And that adds to landfill mass. So the question would be for organizations
is, well how do we reduce that? Amazon’s answer is that it launched
a program called Fulfilled by Amazon Donations in September. Donation is now the default option for
all sellers when they choose how to dispose of their unsold or unwanted
products stored in Amazon warehouses in the U.S. and the U.K. The donations program was launched after
CBS reported earlier this year that a single Amazon facility sent 293
thousand products to a garbage dump in just nine months. After a
French documentary found Amazon tossed three million TVs in 2018, the country vowed
to outlaw the destruction of unsold consumer products by 2023. And the E.U. has an overarching packaging waste
directive that sets guidelines for limiting waste for
manufacturers and retailers. But in the U.S., experts say
retailers are up against a relatively unregulated infrastructure around
waste and recycling. We have a waste infrastructure,
particularly in the U.S., that is not consistent. There are no national
recycling laws in place. There are some statewide initiatives, of
course, but they are sporadic. Apparel has the biggest problem with
excess inventory, in part because of the current trend of fast fashion. Apparel’s a two trillion dollar market,
which is the largest consumer vertical. So it’s much bigger than
movies, bigger than music, bigger than books, although 30 percent of
it never gets sold. And a lot of that
ends up in landfills. In 2014 compared to 2010, the
average customer bought 60 percent more clothing, but kept each
garment half as long. H&M reported in 2018 that it had 4.3 billion dollars worth of unsold clothing,
up seven percent from the year before. It incinerates some
of those clothes. Much of this is because unsold inventory
is pulled to make way for the latest fashions. We’ve moved from a two
season fashion year to a 50 season fashion year. New clothes
coming out every week. You don’t want that prior season
product available, it’s going to really cannibalize your next wave of sales. Burberry famously revealed last year
that it incinerated unsold and returned products worth 28.6 million British pounds, a
practice it’s since stopped. So the reason that very often
these companies will incinerate products that are perfectly fine and good is
because they don’t want them out there in the marketplace. Right, they don’t want
the brand to be perceived as low cost. So an example is
a lot of luxury sellers. A lot of luxury sellers will not allow their
items to be in like a TJ Maxx or a Marshalls because they feel like,
right or wrong, that it degrades the quality of the brand or
the view of the brand. But in some cases, incineration can
actually be more sustainable than dumping clothes in a landfill. In H&M’s case, they have been
recovering energy from that incineration process. So there are power plants,
for example, that use energy from burning apparel products to input
into their power plant. Another useful end point for all
this apparel and other unused inventory is secondary markets. This includes foreign countries where unused
goods are often donated or sold at steep discounts. World Vision is a major non-profit
that helps retailers donate their excess inventory. It says it received
84 thousand pallets of goods and shipped them to 33
countries last year. Even in secondary markets though, the
waste can pile up, especially after China implemented its so-called “National
Sword” policy in 2018, limiting how much waste countries can
export to Chinese landfills. Southeast Asia in particular, has borne the
brunt of this, where waste is being shipped to these countries, and
you then start finding out that there are heaps of waste garments piling
up on islands in Southeast Asia, because they also didn’t have the
infrastructure to deal with this volume. Other secondary markets for unused goods
to go are discount retailers like TJ Maxx and outlet stores, where
returned and unsold merchandise is sent in bulk, marked down, and sold again. And the online equivalent of this. So you can go to some of these
third party companies and buy things that have been returned, kind of
almost like a salvage process. And the really fascinating thing is some
of that ends up back on the Amazon marketplace. Amazon even has
a separate program called Amazon Warehouse, which sells renewed goods
at a discounted rate. And some retailers, like Apple, even
include mandates about recycling and reusing in its contracts. Any of Apple’s products, which are
high value, and that’s often what drives that in the first place,
have to be returned to Apple. And they actually reuse as many
of the components as possible. It also makes sure that their brand
is not undermined by making its way onto a secondary black market. H&M and others, like Patagonia, have
also started programs to help more used clothing find a second home. They will take trade in Patagonia items,
give you credit for it, and then they’ll repost it for sale
on their Worn Wear site. And then there are other companies,
like Nike, that have really been innovating on designing their product for
circularity, so that it’s easier to recycle them and reuse them again. The take-back systems in retailers such
as H&M, where you are encouraged to take back your clothes, some of
those will be put towards insulation for carseats, for housing. Returns are a major reason why the
apparel industry struggles so much with wasted inventory. So in the apparel
industry, they probably have it the hardest, because it can be upwards of
more than 50 percent or even nearly 100 percent of purchases are returned,
because you’re buying two or three of the same item and then keeping the
one that fits or looks best on you. 65, 70 percent of what we return
is because of fit and/or style-related things. Boston based True Fit is trying
to help with just that, by using data and machine learning to better
match a customer’s fit and preferences, so they order
and return fewer items. Our role in this was to organize
billions of dollars of transactions from the retailers, and you know thousands
and thousands of brands feeding us their product data, and
consumers creating this profile. We have 130 million registered True Fit
users now who have shared with us like, here’s what I care about. True Fit works with major
retailers like Walmart and Target. Returns are going to go down and people
are going to keep what they love because we’re going to figure
that out better, right? And the combination of both of those
two things should make the production more efficient and so you have
less going into a landfill. Nike has a feature on its app that
uses your phone’s camera to scan your feet with 13 data points to
suggest the right shoe size. MTailor uses a similar concept, the
custom clothing fit app uses your phone’s camera to measure 17 different body
points that it claims are 20 percent more accurate than
a professional tailor. And there’s in-person options like
Formcut, where customers get clothing size measurements after stepping into
a 3D body scanner. Amazon is also tackling high apparel
returns with Prime Wardrobe, a program launched in 2018 that lets you
try up to eight items before you buy them. A similar program is
Rent the Runway, which eliminates returns by renting out clothing. And H&M just unveiled a line
of conscious exclusive dresses and skirts available for rent. Google is also
leveraging its massive amount of data to help its retail partners like
Macy’s, Target and Kohl’s understand what online shoppers want and cut
down on returns and waste. Google, on an aggregate level, has an
understanding in a country or a geography what people
are looking for. So getting that forecast right, how
much product do you need? What should you be buying? What stores should you
be allocating it to? Now, a handful of small companies have
sprung up to help with the waste and help retailers save money. Optoro is one of them. It collects data on why returns come
back, then optimizes next steps for its retail partners like Best
Buy, IKEA, Target and Staples. Real time, it captures the value of
that product in those markets, and then it captures the data on how much
it would cost to get the good to each specific channel. And making sure that each item is connected
to its next best home and not a landfill. Some smaller companies have even
made a business out of taking wasted inventory off bigger company’s hands
and disposing of it for them. One such company, Stericycle, estimates
it’s destroyed or recycled 80 million pounds of unsold items
for manufacturers and retailers. And some big names, like
Nordstrom, are experimenting with end-to-end automatic sorting and inventory distribution,
which it hopes will mean more efficient reselling of returned
items, cutting down on wasted inventory. Historically, you may find
that solutions are very much segmented for fulfillment, as distinct
from sortation as distinct from returns. And here at Nordstrom, we’re
taking a holistic approach for end-to-end solutions and we’re really excited
to be the first retailer to adopt this combined technology. Amazon is also using robots to
increase the efficiency of its distribution centers and eventually reduce waste. It also has a massive amount
of data on customer behavior. Amazon says its systems are constantly
evaluating what its customers will want to buy, placing orders with vendors
to ensure it stocks the proper amount of inventory. Their technology
can make predictions that says, “Hey, this product, there’s going to
be others that want it. There is demand for it. So if we get
it back, and we get it back in the region where it was shipped, we actually
think were going to be able to ship it to a buyer
in that same spot.”. From automation to algorithms, the good
news is big tools are being developed to help retailers and
suppliers find more efficiency. And hopefully, one day, send fewer
of their excess goods to landfills. The trends are going
in the right direction. There’s great brands that are helping
to lead the way, and there’s regulations in certain cases, which we’ve
seen more so in Europe, that have also helped guide people
in the right direction. If we can provide, as consumers,
a demand for those more sustainable products, it becomes easier for them to
do those jobs in improving those systems.

100 thoughts on “What Retailers Like Amazon Do With Unsold Inventory

  1. One simple solution from the start, not at the end.. stop the over manufacturing of products and these issues go away

  2. Once poor people got garments for free they won't think of buying again ao its their business n marketing strategy…. To keep every customer buying…

  3. People are returning clothes because the style goes out of fashion but if you look at people on the street they're all dressed with the same old shirts and cargo pants with sandals. 😂😂

  4. It seems most people in the comment section still believe in the myth of donating or discounting items to fix problems in the world. 🙁

  5. Albertsons throws out more food then you can understand. No donations due to liability. I deliver daily. The amount of food destroyed is unbelievable.

  6. I worked for an Amazon reseller. The amount of waste is astonishing!! If the vendor didn’t want to resell it, we would trash it or keep it for ourselves. If they wanted to we would have to repack it and send it back to Amazon.

  7. The retailers in my country have a group of “resealed” that include open box and returned products sold at lower prices.

  8. Back when I worked at Journeys, they would make me throw away shoes,hats and clothing. Jokes on them I would hide the items behind the dumpster and then pick them up after work, mostly I would resell or just give as gifts.

    Also I went dumpster diving and found Jordan's and a louie bag, clothing, phones and a Xbox 360,that I used for years. I love dumpster diving, sucks new laws made me stop.

    Also, World Vision doesn't have any way of allowing the international consumer to know that the un used goods are authentic.

  9. It’s simple . People are dumb and shop online for everything . Once they get the package . They finally see what it’s like and if they don’t like it they’ll return . That’s why I always shop in person cause I know what I’m buying .

  10. Nothing about over production as the root cause? Why not just limit that instead of figuring out what to do with the excess? This is so dumb!

  11. They only care about money not the environment not the world not the people. Only way to change it is to boycott but no one will.

  12. Donating clothing to developing nations undermines that nation’s local clothing industry. This causes poverty and loss of local culture as expressed through clothing. This practice should not be encouraged. Instead, if we care about the world’s materially poor, we should invest in and encourage locally-sourced, designed, and manufactured clothing.

  13. this is how the dutch massacre whole population of banda island, burn their nutmeg trees, and increase the price of the spices

  14. So tired of hearing of how the u. s. Is unregulated and eu is better blah blah blah. We aren't a socialist country that needs to regulate everything. Speak up consumers and force the seller to do what's right. We don't need the government for everything.

  15. Today's society has no idea what it's like to do without. During the time of the Great Depression people did not have abundance of clothes they couldn't find work and they couldn't even put food on the table. Back then they had to wait in line for work and food and they fixed the clothes that you had.

  16. Why do people return things in the first place? I think the industry should look into that. If its about quality or false description, its ok. But other than that, returns should not be allowed. Many stories of DVD returns after watching them or clothes returned after use. Why don't the press dig deeper to the root of the problem?

  17. This is sad. Why not create brand tags that can easily be removed when it comes to disposing the products so they can be donated or sold at heavily discounted prices?

  18. If amazon used the correct amount of packaging material, they would greatly reduce return on hard goods. Manufacturers packaging is for shipping on pallets to retailers not individual shipments. This happens all the time, but they charge individual sellers for the process, so they don’t care. Save $2 of materials destroy $100 products, charge sellers fees. Jeff wins, amazon sellers and environment lose.

  19. What about donating those clothes? Why is it “cheaper” to throw them away? Well, they’re not throwing them away as trash, they’re removing those commodities from the market. If they donated those clothes, the market would be flooded with more clothes, supply would increase and demand would fall, and the overall price of clothes would fall and retailers like Amazon would make less money. It’s misleading to say that it’s “cheaper” and it’s misleading to say they’re “throwing away” the clothes. In fact they’re destroying the unsold clothes because it would cost them more money by lowering demand if they let those extra clothes into the market.

  20. Ah yes, the monetary enslavement system: Creating more waste for profit instead of helping the homeless and hungry because it's cheaper to just throw it away.

  21. Simple. Take off all brand name logo from clothing, stamp recycled or other environmentally friendly logos, and send it to homeless shelter

  22. If you need things to make you happy than you will always buy, i learned that in when i spent half of the money i made at my summer job, after that i realized keeping my money and only buying what i need made sense. I prefer to take trips and spend my time with family and friends and cooking, i haven't spent more that 20 dollars for a pair if pants in 20 years, most of my shirts are 15 to 20 bucks and shoes are always under 50 bucks. Everytime i see an add for name brand stuff i laugh, nice but not for me i always say

  23. I have a solution to fix this problem, simply add a discount at check out to include no-returns for a 15-20% discount on the item they are buying.

  24. Let’s face it. When retailer offers free returns what they are really manipulating is the customers will. They are saying come on don’t even think about it just buy it. No risk. If you did think about it you probably would not have bought it in the first place. So the problem here really is greed.

  25. so then show me the option, amazon. say to me, 'hey, we think you might want this item. it's been returned for this reason. here's how much it would cost us to dispose of it. would you give us that much plus a penny for this item?'

  26. 125,000,000,000 a year, spent in credit card adverising. And your filling out an application for approval? If they spend that much money in advertising… You are going to be approved. Then you're going to demonstrate your ability to overpay for things, you don't want or need.

    Do you see the credit card companies pushing dump trucks with tons of cash into the landfills?

    Consumers consuming consumerism.

  27. Hahaha….Spurred on by your mention of Amazon Marketplace, I went to check out prices…not any lower than their regular stuff. So why would I buy anything that has been returned? I do not know what kind of defect it may have. Until they are marking their stuff to ridiculously low prices on Amazon Marketplace, I will just play it safe and order from regular Amazon.

  28. Vote Democrat, call AOC, make everything free. Make it part of the Green new deal, gready company's who created jobs and income cant make money so they destroy it when it can be free, I want me free stuff, dont forget kids meat is murder. Lol

  29. If all these products are unsold, and a lot people in this country are in poverty. How come they just don’t give it away instead of destroying it? I guess they don’t want to be know as the company of giving but would rather destroy instead. There’s plenty of kids and families that would appreciate an unsold tv or unused clothes

  30. Companies destroy their products because they don't want it going to a second hand store that can under cut them on price with the same exact item. Nike does this by destroying their expensive shoes so that no one can get it and sell it cheaper than they can.

  31. Since Amazon seems to have a lot of return problems I would request them that I would gladly take the following returned items for free. The company need not pay me anything.

    65 inch 4k HD TV.
    fully automatic front load washing machine
    15 inch laptop with I7 processor
    latest mobile phone of any brand (> 20,000 )
    1 ton window AC 5 energy star
    225 litre fridge with full defrost technology.

    N.B: All items must be in working condition. I can pay shipping charges.

  32. Let me tell you about my shopping experiences. First, though, I have to wonder, are they making product (the supply) that out weighs the demand. In other words, here, in the United States, we are suppose to be following supply and demand. In other words, say we only need 100,000, but, the producer decides — oh, heck, let's make 1,000,000. Therefore, I do not need a Bic lighter in every color and design imaginable. Second, I recently bought a new pair of winter boots that I had to buy in a size bigger than the size I normally wear. My problem is, I am a big girl and I normally wear a 10. I had to buy and 11. They fit perfect. Except, I think next year I am going to spend more money and get a pair of leather boots with a better rubberized sole. I find the polyester constricts and contorts too much and the polyester does not hold heat as well as a natural fiber. I find that my feet hurt quicker in a polyester boot than they do in a leather boot. But, I just happened upon this pair of size 11, usually, I have a hard time going higher than a 10.
    Also, I had to give away a pair of straight leg sweat pants because they were too short, which I expected, but, I did not expect them to be that short. The front was too high and the back was too low. They were just too uncomfortable. I just bought a new package of underwear, in a size I normally wear and a style I normally get. They are too small, I cannot wear them, they will not stay up on my waist. These are true experiences.

  33. This is INSANE! Why not make better efforts to send these items to thriftstores and other online retailers rather than destroy them?!! I also feel these things need to be donated to people and families who need/want them!

  34. Chaos in recycling, climate change and pollution as well as other areas reigns supreme. Our current way of living cannot sustain this situation too much longer. We need super solutions to all these problems now but don't hold your breath.

  35. The point on data and machine learning really made me think. Consumers generally don't seem to want their personal data shared around, without realizing that this information could be used to help streamline and personalize the shopping process, leading to reduced waste and regretted purchases. With enough information from users, large companies could more accurately predict the demand for certain products, and adjust their levels on a more delicate level, in order to not create unnecessary waste. Then again, I'm sure the analysts have considered all my points, and ultimately I probably don't know anything since the market is efficient. I also wonder how a company would work if it treated extra inventory as dividends to give to its consumers. Would such a system create enough extra demand to offset the costs involved in redistributing unsold inventory? Probably not, but I'd like to see the numbers behind such a decision.

  36. We need to be asking ourselves why these companies don’t see anything wrong morally with throwing away items that could benefit the world. It’s quite selfish.

  37. Rather burn their brand than flood the market and lower the prestige and price. If it isn't selling, it clearly wasn't worth much to begin with.

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