Self-destructive behaviour: Burberry not alone

July 22, 2018 by Katia Dolmadjian
Destroying unsold products, including by incinerating them, is a common practice in the luxury industry, experts say.

Burberry, which has been in the crosshairs for burning tens of millions of dollars of its products, is far from the only firm to destroy unsold goods to maintain the exclusivity and luxury mystique of their brands.

In its annual report the British fashion firm acknowledged that it had burned unsold clothes, accessories and perfume worth £28.6 million (32 million euros, $37 million).

More than a third of the products destroyed were perfumes, which the company said was due to the rupture of its licence with US fragrances manufacturer Coty.

Since Thursday, when that piece of information buried in its 200-page report came to light, Burberry has come under scrutiny on social and news media for the practice.

But industry experts say Burberry is far from alone.

"It is a widespread practice in the fashion industry, it's commonplace," said Arnaud Cadart, a portfolio manager at Flornoy and Associates who has previously followed the luxury industry as an analyst.

He said very few luxury brands hold sales to get rid of stock and instead destroy unsold products. Fashion items with short cycles increases the amount of leftover stock and items destroyed.

"Once you do some private sales to employees and journalists, it's dumping," he said.

Burberry said Thursday it had measures in place to minimise its amount of excess stock, that it takes its environmental obligations seriously and harnesses the energy from burning the items.

"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," the firm said.

The destruction of goods is reflected in financial accounts, but in a manner "difficult to comprehend, often under an entry 'impairment of inventories'", said Cadart.

French luxury giant LVMH said in its latest annual report that "provisions for impairment of inventories are ... generally required because of product obsolescence (end of season or collection, expiration date approaching, etc.) or lack of sales prospects."

Hermes' annual report also spoke of product "obsolescence (notably finished seasons or collections)".

Clear indications of the amount of products destroyed were not provided.

'Not socially responsible'

"It's clear this isn't going well" in terms of public opinion "because this isn't a 'green' practice and perhaps not socially responsible as there are people who don't have clothes to put on their backs," said Cadart.

"Yes, there is a moral, ethical question as well as protecting the environment," said Boriana Guimberteau, a specialist on at the FTPA law firm.

"But from a legal point of view, the brands are destroying genuine products which they own, products that are at the end of their life or the season, and they can do what what they want" with them, she said.

Guimberteau said a tenet of maintaining brand image is that exclusive products should be sold in exclusive distribution networks and that markets shouldn't be flooded with end of season products.

The manufacturers association Unifab, which defends and combats counterfeiting, said there are different reasons firms destroy their unsold goods.

These can include a desire to ensure they don't enter other sales channels, while products such as perfumes and cosmetics have sell-by dates after which destroy them to ensure consumer safety.

Firms also destroy unsold goods "to protect its , which is an asset," said Delphine Sarfati-Sobreira, Unifab's general director.

She deplored the witch hunt against Burberry, saying that a "firm which destroys its products will certainly produce others, thus giving work to some of its staff".

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Squirrel
not rated yet Jul 22, 2018
Is not the existence of such firms the "not socially responsible" problem. After all, what's the difference between destroying a few end of line cloths etc and creating such items to be short lived after purchase (as is the nature of fickle fashion)? The socially responsible thing is to create goods that do not have a "fashion" short life but only for utility function (keep out the cold, rain, Sun, modesty, hygiene etc).
Doug_Nightmare
not rated yet Jul 23, 2018
Manufacturers should be allowed only to produce socially responsible products. Then everyone could shuffle in their shoddy slippers, wearing their grey ticking overalls, off to their MickeyD's Soylent Green burgers dinner.
antialias_physorg
3.3 / 5 (3) Jul 23, 2018
Burberry said Thursday it had measures in place to minimise its amount of excess stock, that it takes its environmental obligations seriously and harnesses the energy from burning the items.

The world's most expensive combustion fuel?

[sarcasm]
Yah,..I'm totally sure the cradle-to-grave analysis of the energy balance is totaly fine [/sarcasm]

"It's clear this isn't going well" in terms of public opinion

No? Really? Do tell.

But in the end the people who buy their products in the first place don't really care about something like 'green' in the least. As long as such negative publicity in the general populace doesn't affect the brand's buyers in the least - who cares, right?
moranity
5 / 5 (1) Jul 23, 2018
The people who buy their product want it to be a conspicuous sign of their wealth, they would want the excess burned to maintain it's price. Imagine if everyone could afford burberry, then the present customers would not buy it.
Whart1984
Jul 23, 2018
This comment has been removed by a moderator.
rrwillsj
1 / 5 (1) Jul 23, 2018
As I've said, this is the Age of the Prophet Orwell. Destroying productivity and endless wars and enforced patriotism based on hate and fear and greed. Guy was a true visionary.

I wonder if an anthropologist would consider these excesses of wealthy exclusivity as an example of 'potlatch"?

It was years ago, a friend who managed a retail outlet for a national chain of men's discount clothing. In general good quality, upper middle class products.

He described that sometimes they received lots of unsold goods. Returned to the distributors from high-end stores.

And that the truly highest quality couture-line products would have the original designer tags removed and replaced with some ad-hoc designation.

For those who learned to recognize the original brands? Careful shopping through the off-brands could find very high quality clothes for a fraction of the original prices.
eachus
not rated yet Jul 23, 2018
As an economist, I read through this with a growing feeling of "Everyone is missing the point!" Burberry's accountants did not decide to have a big end-of-year bonfire. They did the socially, economically, and environmentally responsible thing of accounting for this practice to the owners, operators, and customers of the company.

As for what Burberry did? Business as usual. Some cosmetics and perfumes were beyond their sell-by date set to protect customers. Others were apparently destroyed due to losing the license to sell that line. As for clothing? Some garments would be total rejects, for example an overcoat with a sleeve in the wrong place. Those might be sold as scrap fabric or used as rags internally. Items with minor imperfections? Those are often sold as off-label brands, which can also be done with fashions that exceed their sell by date.

Any company is going to do what they can to reduce this P&L line. They also need to consider the total effect of a change.

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