I read this shocking article about how the brand Burberry burns millions of dollars of unsold stock every year. Some articles put the value at over $100 million over the last 5 years. The reason for burning it is to prevent oversupply that will lead to discounting as well as to limit counterfeiting. Economically, it makes perfect sense as reducing supply of a product will raise prices, provided demand remains constant and there are no substitutes. However, it did get me thinking there must be a better way to achieve both outcomes.
1. Give it away
The obvious alternative is to give the clothes away to those that don’t have clothes. But this raises the question of whether the public would see the brand the same way if the clothing suddenly started appearing on the streets clothing homeless people (exaggerating for effect). What if they “disguised” the clothing by reworking it to remove any obvious brand associations. And also kept the recipients of the free clothing completely secret?
2. Make only what you need
Next idea, what if they just made enough? So they didn’t have to burn anything. The wasteful luxury of high margin businesses is that there is a lot of room for excess. What if they reduced the stock supplied to market but introduced a made to order catalogue to cover for additional demand. They could use some cryptic authentication method for users to be able to verify the authenticity of the garments so that those wishing to purchase original items can have peace of mind that they really are original.
3. Incentivise for good
What if they introduced a social swap system? Basically, Burberry challenges companies and individuals to do good for the world in some way, in return for Burberry merchandise. For example, Edwin raises $1000 for a children’s charity and Burberry give me the equivalent value in luxury goods. Or, a certain food company implements a feeding program that feeds thousands of people every year. Burberry gives this company a matching contribution in luxury goods that the company can use to reward staff, for long service awards or dress the CEO (kidding about the last one, they can buy their own please).
4. Sell it in a different way
What if Burberry simply banked the items and put them in a time capsule vault? After 10 years they are released as limited edition retro collectors ranges at higher prices. Even better, select pieces can be auctioned off. I may have just invented a new category. Burberry, please contact me for banking details!
5. Charge the CEO
What if they deducted the value of the burnt merchandise from the CEO’s remuneration? Suddenly, there would be no stock to burn. Former Burberry CEO’s earned in the range of $15million – $20million per year. Strangely similar to the values of merchandise they burn every year. I bet this problem would magically disappear.
I am just stunned that it is socially acceptable to have this level of waste in the world. There are so many reasons why this burning of useful and fashionable merchandise is wrong. We have offices filled with Ivy League consultants and nobody has thought of a better way? Surely this is one of the real problems worth taking the time to solve for the benefit of humanity in general.
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