Key takeaways:

  • Deadstock fabric and unsold inventory are weighing down the fashion industry, which is responsible for 10 per cent of the world’s carbon emissions.
  • Companies looking to solve this problem are collecting unused fabric and finding places to sell excess inventory.
  • Brands can avoid overproduction altogether by using smarter trend prediction and fabric cutting tools.

In the 18 months since Burberry faced public outrage for burning $37 million worth of excess product in 2017, overproduction remains one of fashion’s costliest and most environmentally damaging open secrets.

In an effort to clear inventory without markdowns, other brands, including H&M, Nike and Louis Vuitton, have destroyed excess merchandise. Deadstock, a term used to describe merchandise that is never sold to consumers, is compounded by the amount of fabric left in factories after a production or style cancellation, as well as rampant returns.

The fashion industry, responsible for 10 per cent of the world’s carbon emissions, is facing broader pressure to reduce its environmental impact, and brands are recognising the need to find more sustainable solutions for unsold items. (Burberry, for its part, banned the burning of excess goods in 2018.)

Alternatives are slowly taking shape. Businesses have launched that help brands change their approach to excess material and inventory, while new fashion brands are changing industry standards by building business models that incorporate used or leftover fabric into new collections, reducing reliance on raw resources. The success of these efforts, however, will ultimately depend on expanding brand buy-in.

The problem with unsold inventory

A key issue driving overproduction is the potential risk of inventory shortages, which would result in lost sales and frustrated customers. Until recently, brands faced no scrutiny over what they did with the items that didn’t sell. But as consumers demand more sustainable fashion — and as the e-commerce market inundates retailers with product returns, many of which go straight to landfill — the opportunity for businesses to swoop in offering solutions has surged.

Parker Lane Group, a UK-based company that works with clients to handle excess inventory and customer returns, helps brands find markets for unsold clothing and recycles items that can’t be resold. (This ranges from off-price retailers to buyers in conservative countries that like discounted modest swimsuits unsold in markets where bikinis are popular.) The company’s goal is to find the most efficient use for each item. “All waste has value if you know how to handle it,” says chief executive Raffy Kassardjian. The company, launched in 2010, currently has secondary markets established in more than 60 countries, its own sorting facility in Poland and a recycling centre in Tunisia.

Brands are incentivised to work with Parker Lane for the economic savings. Without disclosing specifics, Kassardjian says one of the company’s biggest clients reported between a 30 to 40 per cent increase in value monetised from unsold inventory since working with Parker Lane, compared with processing it independently. “We focus on returning value to brands. We want to generate as much value as we can,” Kassardjian says. The company has plans in the works to expand into consumer-facing operations with retailers, coordinating where excess inventory is resold.

US-based Optoro offers brands a similar service for dealing with unsold goods. Using AI and machine-learning software, its platform processes millions of items a year, marking each for resale or donation. According to the company’s head of sustainability Ann Starodaj, the majority of items are put up for resale, meaning the product could go to several different channels, including the brands’ outlet platforms, Amazon, Ebay and Optoro’s resale site, Blinq.

Both companies accommodate brands that don’t want products with logos or trademarked items being resold in discount markets, but Optoro and Parker Lane primarily work with high-volume activewear or high street brands, not image-sensitive luxury brands. One of Optoro’s goals is to show luxury brands the potential value of remarketing unsold items. While lower volume, luxury brands still contend with unsold products, as Burberry demonstrated. The brand now donates excess fabric to a women’s cooperative in Italy, working with organisations to recycle waste and exploring ways to repurpose raw materials and some unsold finished products. Burberry claims to be the only luxury brand committed to not destroying unsold items; Kering and LVMH did not respond for comment.

New fashion from old fabric

Some fashion designers see new opportunity in excess fabric in the supply chain. In 2013, designer Rachel Faller started the ethically made women’s clothing and accessory line Tonlé, made from textiles cast off by factories in Cambodia, where she lived for five years. These materials include end-of-season excess and fabric pieces leftover during the cutting process, the result of factories optimising for saving time rather than minimising fabric waste, says Faller.

Using whatever materials are available as a starting point in a design process can be limiting, but that’s a cost Faller sees as necessary. “The earth’s resources are already beyond tapped. We believe that restraint is the way of the future, and we have grounded our business model in these practices.”

New York label Paskho was founded by former Giorgio Armani and Perry Ellis executive Patrick Robinson with a similar goal to use up waste found in apparel factories, which costs between 20 to 38 per cent less than new fabric. If the brand, which sells men’s and women’s travel wear, does source new material, it’s approved by Bluesign, a sustainable textile certification scheme. Robinson says none of the material goes to waste, a commitment made possible by a computerised factory process that optimises smart fabric cutting.

Deadstock can be an efficient way for other brands to experiment. About 15 per cent of Reformation’s products are made with deadstock, which it uses as a source of novelty and speciality fabrics. “If we want to try something different, deadstock allows us to do that without developing new fabrics or ordering a minimum amount,” vice president of sustainability Kathleen Talbot writes in an email. She says that in most cases, Reformation looks for materials to fit a specific need, such as embellished fabrics and faux fur, but the company also uses what mills tell it is available when it’s a good fit.

Quantities of these unused fabrics are vast enough that entrepreneurs have also started creating systematic ways to funnel them into the hands of those who will use them. New York City-based Queen of Raw operates an online marketplace that buys and sells unused fabric waste. “It’s in mint condition. It just sits in warehouses collecting dust. It didn’t make sense for the planet, and it also didn’t make sense for businesses,” says co-founder Stephanie Benedetto.

She says brands can recoup up to 15 per cent of their bottom line by letting Queen of Raw sell their unused fabric stocks. In the last year, the company has grown 110 per cent year-on-year and has over 100,000 users that include fast fashion brands and luxury houses. But according to Benedetto and her team’s calculations, $120 billion worth of fabric ends up in the landfill every year, meaning there’s still much room left to grow.

Targeting a different segment of the supply chain, FabStrap collects 6,000 pounds of fabric scraps weekly from corporate fashion offices, factories and cutting rooms in New York City. It then sells those online and in its physical shop near the Fashion Institute of Technology to a clientele that ranges from sewing hobbyists to emerging designers focused on sustainability. Founder Jessica Schreiber says her company provides an annual report to the 400-plus brands it works with detailing how each brand’s materials were used and the resulting environmental benefits.

For brands just dipping their toes into sustainability, she says, it’s a measurable place to start that doesn’t create reputational risk, as materials are not identifiable by brand.

Solving for overproduction

While convincing brands to funnel unsold inventory into secondary markets extends the life of products, and using deadstock fabric helps eliminate waste, neither solution helps to eliminate overproduction. Overproduction is a result of seasonal inventory and miscalculated demand predictions, while excess inventory can stem from failed quality control and pulled production.

ZigZag Global, which manages customer return logistics for brands, analyses data from returned items and provides it to clients to optimise production levels. This helps brands better predict what sizes and colours to stock for which markets. Managing director Patrick Eve says that brands typically overproduce by about 40 per cent. “What we want to do is help the retailer produce the right number of goods.”

Francois Souchet, who leads the Ellen MacArthur Foundation’s Make Fashion Circular initiative, believes that tackling the overproduction problem at its source will require fundamental changes in how the industry approaches garment design and plans for production. The ubiquity of large order minimums — for final products as well as in earlier manufacturing stages, such as fabric sourcing — builds waste into every step of production, something that can be avoided. Souchet points to Zara, which has faced criticism for propelling the wasteful fast fashion model but tests new products in markets before ramping up production, helping it to avoid wasted inventory.

Faller’s hope is for production and design to be integrated. “Designers are usually working in a box that is totally isolated from the production constraints. Another team typically figures out how to get everything made, cost-effectively, after the design team hands it over,” she says. But as long as most brands don’t own their production, progress will be difficult. “The incentives aren’t aligned to reduce waste or find creative ways to use their own waste — never mind take care of garment makers or the environment.”