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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 comments

Yes put an end to designer clothes, and make more shirts with made to order prints. Mass manufacturing of the same item is the problem. The only reason an item should be returned is if it is defective or the wrong item. Returns should not be so easy either. Buying on Amazon is like going on a blind date. The pictures often aren't the real product being sold and if it is used the real condition is often unknown. Amazon should go out of business for all I care.

Think before you buy !!! Reuse-recycle now more than ever! This madness has to stop 🛑! No one NEEDS constantly the latest gadget or fashion . We, the consumers, can help large companies to shift from over production to smart production by applying a drastic change in our purchasing behaviour. Unfortunately the Insta-Hipsters and dumbed down screen staring youths might not get the message. Narcissistic behaviour has increased beyond a comprehension, we certain,y have our work cut out here…

This is sick… You know how many people will be glad to have some of these things?? Especially the shelters and salvation army and vets…

They did this with food during the last depression. They burned it or trashed it rather than gave it away. If they gave it away then the profit margin would sink and people would get lazy waiting for handouts. People who couldn't afford the item at the time either starved or worked harder to get it. Sink or swim theory.
I can see how this applies to clothing and unnecessary products, if its affordable and unlimited, we turn gluttonous. By keeping product prices high and limited in quantity most of us are buying on a need it standard and not a want standard.
Now if they would just work on quality instead of quantity……..

Interesting…..I tend to resale my old clothing on the many apps and website available these days and hardly shop online because I hate having to go to the return process just to get the correct size of 1 item

The US don’t regulate because we aren’t communist. People can throw away whatever we want. If it made sense not to-they wouldn’t. The funny thing is- people that are concerned about this are the problem, in general the 18 to 35 age are extremely high on poor research purchases and returns and extremely high on fraud purchases aka a tv for the Super Bowl then a return after.

I’m so mad at these things, governments are telling people to recycle, but they are doing nothing about these big companies who are actually the ones polluting the world, what they think they gonna do with landfills ?!? Is not like they disappear over time, there won’t be anymore space to put all this waste in, we are just doomed I swear we will end up like in the cartoon wallee. The other day I was sorting out my recycling bin separating plastic from pet and a lot of the things I’ve found where plastic but not recyclable such as food containers for Daly meat, like wtf, we as the consumers are asked to do the hard work when they could simply increment some rules for these companies to make at least fully recyclable containers so we won’t have as much waste as we do, but no too hard to ask let’s just make the consumer worry and do all the hard work for us

Per capita, how does this compare to yesteryear when items sold in a given country were predominantly made in that very same country? Yeah, it is one more reason not to buy Asian made items – particularly if you're headed for a climate change rally in the US.

Anyone seen The True Cost on Netflix? It shows the exploitation taking place in sweat shops to make our clothes. It's a very good doco

Nice to know That those Designer Clothing Manufacturers care about the Poor who may not have any clothes. Sustaunable burn your rotten threads Americans won't buy your junk anylonger.

The numbers of waste is shocking. Think how much good it can do if they ship it to the poorest countries on the planet, like Santa Claus…

Anyone else see the amazing waste of labor here? Too many jobs and workers. Industrialization is disgusting. Industrialization leads to industrialized wars like in Iraq and Afghanistan. The amount of overwork keeps the slaves ( working class ) too busy to understand.

in 1980 and 1990s, one jean cost more than $60, I can't afford any pants that years but dormmate sold me used jean for $20, I wore few time still not comfortable then gave away to friend. he wore until it wore. right now i bought from Ross and Marshall under $20.

Wanna save the planet(your air, soil, water) ? Simply STOP PRODUCING PLASTICS AND FAST FASHION NON ECO FRIENDLY CLOTHES, AND SO MANY UNUSED ELECTRONICS.
Why fast fashion giants are fooling everyone. All these clothes can be turned back into threads and are great thing. In India we are already doing it with imported clothes.
The manufacturers must comply to eco friendly conducts.

This is absolutely mental and something needs doing to stop it right now. It just shows how much we are being ripped off on pricing even when it seems cheap on Amazon. If they can throw out so much stuff and still be profitable.
I'm not sure I like Apple's way of doing it though. You send an old used item to Apple and they reuse parts in "brand new" products and sell it back to customers at high prices. That seems bad to me tbh.

Armani exchange is one company that’s also wasteful .. they cut up the clothes their employees wear when they don’t buy it.. pure wasteful !

Good to see EU regulations forcing somewhat more ethical conduct on companies; when will US lawmakers wake up from an all-consuming capitalistic obsession & start caring about the environment & the whole product life cycle? But we can't put all that much faith in politicians in pockets of corporations; it's best consumers make serious changes to our behaviours & REDUCE, REDUCE, REDUCE. Only buy classic styles that fit well & last long!

What a sad and awful truth. The government always tells us to try our best to recycle the trash, yet that company can easily throw away their junks?? And they got no punishment nor sanction for doing that, like seriously man, is this a joke??

for what we recycle if large companies continue to produce quickly and excessively in the name of profit. the use of clothing is often longer than excessive production

Why not give the unsold products to people in need. Underdeveloped countries for example instead of just creating a bunch of waste… Do some charity while you're at it!

Another good topic…. it's something we don't think off but it must be an incredible amount….CNBC really put out fantastic content

Huge companies like Amazon should bare the brunt of all recycling because there profits are insane …cost of whatever they could cover it

Those high end brands need to have their own outlet stores selling their own stuff at a deep discount. That doesn't degrade their brand at all and a lot of people would buy the stuff there, thus eliminating some of that waste. They wonder why people are able to get so much stuff dumpster diving at stores in the USA. People don't care about recycling in the USA enough to regulate it properly. I wish people cared more about recycling and where those recyclables actually end up.

Please! Here is why I pray that all your junk you creat all your ideas you stole from the ideology of socialism that is socially supposed to fatten the pickets of the social human circles that created neighborhoods just like facebook Facebook was created off the premise of socialism period is why facebook needs to be goverment taking over all social media needs to be taken back by the goverments that actually foot the bill for it all from the citizens from neighborhoods the United States of America made the neighborhood made the colleges made the military and using military money to tackle most human problems in the first place!!!!!!!!!

Start getting more African Americans involved with these stories because let's face it you white people who are immigrants are still fighting your own territorial dessimation of your own countries that your race bankrupting the countries heald as a majority of just there respected races Chinese, Russian, Poland, Germany, Pakistan, Greenland all those countries are so racist amongst themselves it's sick in the head sick!!!!!!

If I was a women I would only be with intelligent black men I would breath them because Black men understand exactly how racist white men really are and can really take into the court system and rip there asses apart police, fire, doctors, Lawyers all work under federal workers policies along with state policies please they all need to be civil law suited out if human existence a d make them all work the land for all that white skinned men have stole. By way of racism and using institutional prison systems to afford there twisted demise of life!!!!!!!

In the U.S, All of that return inventory such as clothing, electronics and toys should be donated to Goodwill, Red cross, Veteran's of America, etc. It doesn't make sense that it goes to a landfill when there are so many that don't have. Unbelievable!

LOL.. WE have gathered enough data on you and your neighbor that we know what you will buy and if we ship 2 in your area.. your neighbor will buy one in a few days..
but china is stealing your information.

why this greedy company doesn’t send this item to poor country or give it to charity instead of burning it or destroyed it !!!! what a disgusting company !!!🤢

Why would you burn apparells you can't sell? Why can't you just give it to the poor? Is common sense dead these days?

This can’t be correct. Amazon? You mean the company that’s going to put your company out of business and pay you 1/2 what you make now doesn’t care about the environment?

These so called "Developed Countries" are the one's who are polluting the environment for their greed and senselessness

Why don’t they donate returns and unsold items to orphanages, widows, or the homeless? Give it to someone who is less fortunate and help them.

My mother literally drives through the rich neighborhood and brings home very nice furniture that was on the curbside to be thrown away. One day she brought home a very comfortable leather loveseat that has no marks or scratches anywhere. It’s like brand new! Very comfy too.

Send to our countries Afghanistan, pakistan, india and more. Here our poor dont have anything even to wear. They destroy them. Its a shame they dont know what to do with it and our poor people dont have any piece of clothe to wear in this harsh cold weather

You look at clothes today the material is so thin and tears so easily. I cannot find socks that don't wear out in a couple of months only walking a couple of miles a day in them and now there so thin there is no cushion to them at all. Tried many different brands from cheap to not so cheap and they are all the same. The t-shirts are the worst, made much more cheaply than they were before, lucky to get a year of wear out of them. A lot of t-shirts are see through so you got to wear another shirt under a t-shirt. WTF… I would like cloths that I buy to last longer than a year. I truly hate shopping especially for clothes. Just bought a name brand long sleeve t-shirt to replace another that I retired because it had worn out, to have to return it because it it lost two sizes while washing it one time in cold water on gentle. How did it happen, how did it shrink in cold water? My machine is only ever on cold.
Now it is also effecting sheets. Bought not cheap sheets to have them tear in guess what a year. Almost 200$ sheet set ripped in a year of only washing once a week. I bought the same sheets 5 years prior and they are well made and still in good shape and 5 years prior those are great shape that you feel the difference and can see the difference. Just wish they fit my bed so I wouldn't have to buy more sheets.
I compared a lot of my clothes and sheets to notice the difference before you didn't see through the clothes. They were made with higher quality of cotton woven tighter which lasted longer. Less loose threads, and cotton was way less itchy.
The best t-shirt I actually found that don't rip in a year is the dollar store. Go figure, but they are itchy and guess what not see through. They don't look good but at least last a few years. Now if I could find the golden ticket socks that won't wear out while walking.

Latest fashion and updated product are great but at least, updating clothes fashion and electronics should be at least once a year.. It's the reason why a lot of old products aren't selling because of constant updates and or just bad designs

Its because FBA doesnt know how to properly package products so many things get damaged or destroyed and customers return it.

This ultimately cannot be solved with better technology. We need to change our culture and laws that favor consumerism, waste, and excess

People want to blame God for the evil in this world. It is the greed of people that fuels waste, destruction to the environment and poverty.

This is one of many problems with the way we do capitalism. There are no consequences to big business for all the waste produced.

A large part of the blame is ours, the consumers.

It's more difficult to judge the suitability of an item if you're buying online, the tradeoff for the amazing convenience.
Just a few years ago I wouldn't even have considered returning an item, it was heresy. But now Amazon is even more convenient.

ok i get it, but does anyone else realized that even if that item is resold, eventually once its worn down in a couple of years will also end up in a landfill. just as death is certain, so is that every single item made will end up in a landfill. theres no escape.

Wait, residents in Phoenix, AZ can't legally burn the rare log in their fireplace but H&M can incinerate tons of unsold clothing? I'll never shop at H&M again…

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