Burberry graced the news headlines this week for all the wrong reasons. It’s been uncovered that last year it burned $49.4 million worth of product.
Why in the hell would Burberry burn product it worked so hard to design and produce?
This is a dirty little secret in the fashion industry. While the consumer side of fashion waste has been thrust into the spotlight in the last 12 months, the brand and manufacturers waste remains firmly behind the curtain.
Reason #1: Shareholder wealth.
Corporations are legally obligated to maximize wealth for their shareholders. That’s literally their mandate. Once you become a corporation with investors outside your inner circle, your primary focus is making money for them. LEGALLY, that is your obligation.
This is why companies turn a blind eye to labour and environmental violations. Many produce offshore through contractors in order to side step responsibility and continue to find ways to circumvent various laws that affect their bottom line. They’re not forced to break laws, however they are forced to indefinitely increase revenue, which isn’t necessarily possible.
They are forced to continue to expand, “even if that risks diluting their identity and creating excess stock.” (Tim Jackson, head of the British School of Fashion).
Despite incinerating tens of millions of dollars of product, they actually reported that they cut costs last year.
Reason #2: Exclusivity.
The paradox of continuously growing but also remaining exclusive. Positioning your product as a luxury item means it is not widely available. The product needs to be expensive and referencing basic economics, that means demand needs to exceed supply. How do you continuously grow, even when the market isn’t demanding that you do? How do you artificially make demand exceed supply?
In the case of Burberry, you burn unsold product to avoid flooding the market with excess goods that will be marked down and sold for their true market value.
Burberry doesn’t create products that solve a problem. They create goods with a high-perceived value propped up on prestige pricing and exclusivity marketing.
If they allowed the true forces of economics to work, the market would pay considerably less for their products.
Think of all the 50% off sales at the end of a season. Every brand has excess goods; it’s the way the industry operates (note: it shouldn’t be and we’re working on that). For a luxury brand, a 50% off sale pollutes their prestigious image. Unless you fit their image of wealth and style, they don’t want you to carry around their bag.
Reason #3: Waste is part of the plan.
Waste is part of the business plan in the fashion industry. Exhorbitant mark ups offset the inevitable overstock of product caused by seasonal fast fashion cycles.
Nearly every big brand accounts for massive end-of-season sales. To manufacture in time, brands need to create a product line nearly a year in advance and hedge their bets on what will sell by curating enormous collections.
When you’re a luxury brand maintaining image and you don’t want to account for sales, you account for scrap.
I guarantee you that Burberry just happens to be in the spotlight right now, while in reality a laundry list of big brands incinerated hundreds of millions of dollars of perfectly good product last year to maintain brand status.
Let’s close with Burberry’s spokespersons insightful quote on why it’s acceptable to willfully waste resources in the name of profit, translated by yours truly:
"Burberry has careful processes in place to minimize the amount of excess stock we produce. 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," a spokesperson for the company said.
“Burberry is careful to hide the fact we incinerate enormous quantities of product on a regular basis to prop up our relatively useless products. On the regular occasion when disposal is necessary, we only dispose of the exact quantity we need to maximize our profits while not losing customer base. We’re make an effort to avoid waste, but some years consumers just don’t want as many overpriced hand bags as other years. As a result, we must artificially create scarcity to drive demand for current, future and past products.”