APPAREL

We Made Too Much

Months after the pandemic slowed retail to a standstill, brands are still struggling to move mountains of unsold inventory. Like the unfolded laundry pile staring at me as I write today, this mess has layers.

The backstory: Retailers ended up with 525,600 minidresses largely because inventory forecasts didn’t predict the pandemic. And retailers often produce more than they can sell.

• A broken fashion system made the inventory crisis worse for designer brands, the NYT Magazine writes. Brands that partnered with department stores often created “novelty” or “exclusive” items for each wholesale account they opened. 
• Those items appeased corporate buyers...but shoppers didn't bite.

The temporary solution: Brands are flocking to donation services to offload the goods they haven’t sold this summer, the WSJ reports. 

• Clothing donation firm Good360 expects to receive $660+ million in retailers’ unsold clothes by the end of 2020. That’s 2x the donations it received last year. 
• Gap alone has donated $60+ million of unworn apparel during the pandemic. 

It’s a charitable choice, but it’s also to circumvent a controversial alternative: destroying inventory. A famous example? Burberry’s 2018 admission that it burned $37 million of unsold goods. 

Shoppers and government agencies in some markets have stepped in to demand cleaner practices, but they’re not uniformly enforced across nations or even within large companies.

• LVMH has started partnering with a recycling company to process merchandise it can’t sell, but only for 11 of its 75 brands. Of those, some items are still destroyed.
• Amazon has started donation programs for merchants in the U.S. and France with unsold merchandise, but Amazon still destroys some unsold inventory in the U.S. 

Another alternative: If retailers can’t get their orders in order, they can also sell inventory to off-price retailers like T.J. Maxx. But concerns about diluting their brands’ value makes this option less attractive.

My takeaway: If retailers only produced what their customers truly wanted, the inventory glut would shrink. Now that the pandemic’s revealed the worst-case scenario for excess inventory, some brands may be convinced to create smaller batches at the outset.

TECH

Don't Say It, Don't Say It, Don't Say—

The coronavirus is accelerating retailers’ interest in autonomous tech. Sorry. It’s true.

The latest: American Eagle Outfitters said it’s installing 26 autonomous picking bots from Kindred AI in its U.S. distribution centers. 

• One worker can operate up to four Kindred SORT bots at a time. The machinery uses AI and mechanical arms to pick and sort apparel.
• AEO hopes to speed up e-comm fulfillment while maintaining social distancing.

Sounds familiar...In May, Gap sped up the delivery of 30 Kindred bots to its U.S. distribution centers ahead of an expected e-comm (and COVID-19) surge.

Big question

Are the best e-comm supply chains powered by pickers that don’t cry when the “All Too Well” bridge hits? 

My answer: It’s not a simple yes or no. The benefits I’ve mentioned in past Brews still apply, mainly that autonomous bots are highly efficient and social-distancing friendly. But the upfront costs are steep, and removing job opportunities in favor of automation could attract controversy. 

Either way, brands that haven’t ordered yet will have to get in line. Pandemic manufacturing delays will depress overall bot production this year, per market research firm Interact Analysis.

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MALLS

You Think You're Productive?

Simon Property Group must have hired Kris Jenner as its publicist, because retail Twitter’s obsessing over its every move. Here’s what you actually need to know.

Approved: Simon and Authentic Brands Group (ABG)’s joint takeover of bankrupt denim purveyor Lucky Brand Jeans was greenlit in bankruptcy court on Wednesday. 

In progress: Brooks Brothers is awaiting court approval to call Simon and ABG its owners, and a decision could come by the time this sentence ends. Simon and ABG offered $325 million to acquire the bankrupt suiting brand. 

Simon and fellow mall owner Brookfield Property Partners are now the lead bidders in negotiations to purchase JCPenney from bankruptcy, the WSJ reports. Sources say potential lease concessions for JCP made its landlords the most attractive buyer. 

Payoffs? Debatable. CEO David Simon called the company’s potential string of brand acquisitions a “sideline business.” Where I see brands that shoppers had reasons to abandon, Simon sees valuable IP, at-cost inventory, and potential fulfillment center experiments. 

• Cynics say Simon (the company) is protecting rent collection by purchasing its tenants—but Simon (the CEO) denied this.

WHAT ELSE IS BREWING

• U.S. retail sales rose 1.2% in July. This is the third straight month of growth, but by far the slowest yet.
• Former Glossier employees accused the brand of discrimination and unsafe work conditions in an open letter.
• Lowe’s is opening four fulfillment centers to meet online demand. 
• Asos raised its 2020 guidance as reduced returns fueled its earnings beat. 
• Tapestry beat fiscal Q4 earnings expectations...by suffering a $70 million loss. 
• Mattress sales are slightly rebounding during the pandemic.
• Prana, an activewear brand, started an open-sourced forum for sustainable packaging.

EXPERT INSIGHT

Office or no office, all I need to write Retail Brew are my laptop, strong wi-fi, and stronger cold brew. The story's different for the teams at DTC brands, where creating new products requires testing materials for quality control and collaborating with several partners (suppliers, manufacturers, other teammates). 

Without an end to WFH in sight as the pandemic rages on, how are DTC brands approaching the remote product development process? 

For our latest Ask the Experts column, I asked leaders at Rothy's, ADAY, Alleyoop, and Madhappy to share how they've adapted the product development pipeline for remote work, and how other brands can follow their lead. For starters? They’re incorporating a mix of 3D imaging, at-home testing, and lots of Zoom to bring new products to life. 

Click here to learn about their WFH product design hacks.

SWAPPING SKUS

One surprise trend: Shoppers are swapping merch from streetwear brands for merch promoting public sector institutions like the National Park Service and the USPS. Will it last? (Elle)

One hit item: It’s taken off during the pandemic. It’s beloved across TikTok and Instagram. But it’s the opposite of loungewear. (Vogue)

FRIEND OR FAUX?

Three true retail stories, one I made up when I should have been reading earnings reports. Which story is fake?

1. Joining the likes of Chanel and Hermès with a Paris, France, flagship? Skechers.
2. Rihanna filed trademarks for a future Fenty cookware collection.
3. DTC founders are developing an operators-only Twitter replacement.
4. Dunkin’ beat Starbucks to kick off this year’s PSL season.

ICYMI

Catch up on the top Retail Brew stories from the past week.

• Retail and Higher Ed Are More Intertwined Than You Think
• Brands Are Avoiding Department Store Partnerships
• The Future of DTC Brand Launches, Explained by Founders

FRIEND OR FAUX? ANSWER

3. Nope, the titans of DTC retail aren’t developing a founders-only social app (that I know of). Then again, Clubhouse is already doing the job.