You Won’t Believe How Much Luxury Brands Are Throwing Away

It’s a practice that isn’t exactly new to fashion insiders.

Still, when Burberry released its annual report last month, the 28.6 million euros ($32.7 million) worth of products it sent to the incinerator in the past year easily made headlines. (For context, the figure represents the retail value of the products, and not Burberry’s actual manufacturing spend.)

Many criticized the brand’s decision to destroy its unsold stock, citing mostly environmental concerns. Nevertheless, Burberry’s report stated that the company has maintained its position at the top of the Dow Jones Sustainability Index for the third consecutive year and recently struck up a partnership with the Ellen MacArthur Foundation’s Make Fashion Circular initiative to reduce global waste through the recycling of raw materials. (H&M, Nike and Stella McCartney are also among the initiative’s participants.)

“Burberry has careful processes in place to minimize the amount of excess stock we produce,” the company wrote in a statement. “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.”

It’s not just Burberry that’s disposing of large amounts of goods. Richemont — parent company of upscale brands like Cartier, Piaget and Montblanc — also made headlines in May for buying back 481 million euros’ worth of its designer watches over the past two years to be dismantled, stored or redistributed. Chanel and Louis Vuitton have also been said to burn or destroy unsold stock.

Outside of luxury, Nike came under fire last year for slashing “a small amount of product” at its Soho, New York, outpost that “did not meet our standards to restock, recycle or donate, so it was disposed of.” Even fast-fashion retailer H&M has reported sending items to the pyre “when they do not fulfill our safety regulations.” (It added that products “stopped” for reasons other than health and safety were either donated to charity or recycling companies.)

The Gray Market

For customers, the destruction of millions of dollars’ worth of goods might seem like an exercise in vanity, as they question a brand’s decision to destroy stock rather than sell it at a discount to customers who generally aren’t able to afford the steep price. But luxury companies argue and their protractors contend that they have their reputation to protect, and the unauthorized sale of their products can diminish the exclusivity — and price — often associated with top-tier labels.

The gray market — or the parallel retail sphere where items for sale have been manufactured by designer brands but are being sold outside of their approved distribution channels — has long posed challenges to legitimate brands.

By way of gray market practices, luxury goods are reaching buyers for a fraction of their retail price, often in environments that sell low-quality — or worse, counterfeit — products that only serve to depreciate the perceived value of luxury associated with a brand.

“To keep exclusivity for the brand, businesses are destroying excess stock rather than donating it. It’s been happening at many levels but much more prevalent with luxury brands,” said Ann Cantrell, professor of fashion business management at the Fashion Institute of Technology. “Whether it’s fear of falling into counterfeit hands or just the wrong crowd, destroying the goods removes any opportunity for the items to end up in undesirable hands, and they can remain in control of who owns their product.”

Another reason fashion firms may dispose of their own wares is to take advantage of a rebate brought about by duty drawback, which allows the refunds of duties and taxes previously paid on imported merchandise that is subsequently exported or destroyed. The U.S. Customs and Border Protection states that “if imported merchandise is unused and exported or destroyed under Customs supervision, 99 percent of the duties, taxes or fees paid on the merchandise by reason of importation may be recovered as drawback.”

Moving Toward Sustainability

The past several years have seen an increasing number of brands adopting more sustainable practices, following concerns about chemicals used in the production process as well as ethical labor conditions and the recycling of used materials.

On one hand, there are designers like Stella McCartney, whose lifelong vegetarianism contributed to a business model centered on ethical practices. (Its parent company, Kering, has also worked to position itself as a leader in the sustainability space.) And since its founding, Brother Vellies, launched by FN cover star Aurora James, has offered traditional African footwear that creates artisanal jobs in places like Kenya, Ethiopia and Morocco. On the other hand are brands like Tommy Hilfiger, Versace and even Burberry that have moved toward circular fashion as consumers continue to question the social, economic and environmental impact of the products they purchase.

Fast-fashion retailers are also getting eco-friendly. H&M, for instance, announced in 2013 its Close the Loop initiative to prevent old clothes and discarded textiles from ending up in landfills, introducing garment-collecting boxes for consumers to make drop-offs in exchange for a discount voucher. The items are then sorted into one of three categories: rewear, where they are sold as secondhand clothes; reuse, where they are turned into other products (think cleaning cloths); and recycle, where they are transformed into textile fibers and used for insulation, among other purposes.

But more needs to be done. “For every Burberry, there’s hundreds of other brands doing exactly the same at several points in their fashion supply chains,” said Orsola de Castro, co-founder and creative director of UK-based Fashion Revolution, an organization that launched the #WhoMadeMyClothes campaign to demand greater transparency in the fashion industry.

The first step for companies, she said, is to ensure better transparency in the fashion value chain, which allows consumers to see what, where and how much waste or surplus is created. Customers, after all, have the right to know how brands dispose of their unused stock as well as its impact on the environment.

Additionally, de Castro suggests that companies may be able to invest in alternative solutions such as upcycling (the creative transformation of discarded materials). Meanwhile consumers must remain mindful about their shopping habits — starting with making wise purchase decisions and responsibly caring for and disposing of products.

“We need to keep scrutinizing, keep being vigilant and ensure that we can demand that brands become more transparent about their waste practices,” she added.

Cantrell echoed that sentiment: “More than ever, customers speak with their pocketbooks and won’t stand for this type of disregard for product and brand value. Consumers have a voice, and they are being more vocal than ever that the fashion industry needs to change.”

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