What Can Retailers Do With Their Unwanted Merchandise?

by Xin Lu on 8 January 2010 33 comments
Photo: Trash Clam

A recent New York Times article reported that retailers including H&M and Walmart have been destroying perfectly good clothes that were not sold and throwing them in the trash. This is a terrible waste, and it really saddened me to see that these stores did not even try to get rid of their unwanted merchandise in a more environmentally and socially friendly manner. Here are some of my suggestions, and I encourage you to add your own comments.

Donate

The new development is that H&M pledged to donate all unworn clothing. Usually companies that donate goods to charities can receive a tax deduction, but many do not do so because they are afraid of being sued by someone who gets hurt by the donated item. It does not take too much effort to drive a load of unused merchandise to a charity. I imagine intentionally destroy everything takes more work, and there is no tax deduction.

Free Rack

One way my parents got rid of unwanted junk was to leave it outside with a sign that says FREE. If retailers did this they will have many takers of their unwanted stuff. Some say that retailers are destroying goods instead of giving them out because they are afraid of fraudulent returns, but that is easy to remedy with a return policy that says no returns without receipt. A free rack probably attracts business, too.

Overstock and Liquidators

There are many companies that pay cash for overstock items, so there is no reason to destroy anything. Many stores like Ross and TJ Maxx sell overstock items purchased from other retailers. We also have Grocery Outlet for food items.

Give them to me

I would happily keep, give away, or sell any retailer's merchandise for them.

Unfortunately it seems that many corporations have policies that prefer destroying perfectly good merchandise over giving them away because they can write off the item as a loss and they do not have to worry about the liability of any harm the merchandise may cause. This may make sense as a business decision, but it is nevertheless incredibly wasteful. Ultimately, the retailers are in control of what they want to do with their merchandise, but there has got to be a better solution than simply destroying things people could use.

What do you think?

4.25
Average: 4.3 (4 votes)
Your rating: None
ShareThis

comments

33 discussions

Add New Comment

CAPTCHA
This test helps prevent automated spam submissions.
Guest's picture
Christopher

Although I'd totally be down for a free rack at H&M or other dept. stores, I'm betting that that's not a legal option, nor a economically viable one due to some stores' price adjustment policies.

Guest's picture
Skipper

Rather than damage the goods, why not donate them to the salvation army or other stores that sell used clothing, or charities that distribute clothing to the needy and write it off as a charitable contribution. To render items useless is beyond belief when there are so many places to put them to good use.

Guest's picture
Bill - The Carbon Credit King

These companies are takign the write off on the merchandise to improve their bottom line, for their share holders, who have invested their money to realize a return.

Why is a company in any way responsible for people who want things, that can't afford them, and why should shareholders lose out on the write off because of it?

Because you say, it is the right thing to do?

Sigh, more people have died of starvation because of the liberal ideology of getting food stuffs to Africa, than woudl have starved if left to their own devices, just because it makes you feel good to do something, doesn't mean that it is the right thing to do. Someone without a coat today, might take it upon themselves to learn how to make one for themselves tomorrow.

How about treating Adults like adults and not children?

Guest's picture
Small Town Celebrity

There are many ways to go about preventing lawsuits and/or returns from donated items. There are companies that can be built on overstock/damaged/discontined items. That would be only GOOD for the American economy.
You say that these companies are taking a "write off", but in reality they're getting reimbursed for the damaged/unwanted goods from insurance companies. They can take a "write off" without messing up their bottom line, they just have to claim it as a loss of income on their taxes. What they're doing now borders on insurance fraud. They are presenting and paying out insurance reimbursements as profits to their investors. It's insurance money NOT PROFIT. And is NOT the reason insurance was ever established.
Misuse of insurance is one of if not the most economically damaging acts committed in America. Insurance is EVERYONE's money put together, not just these companies.
For the good of our country these insane acts as well as ridiculous settlements paid out by insurance companies to lawsuits need to stop. It has already caught up to us, and now we are being buried by it.

Guest's picture
Eliza

How about not assuming that you are talking to a bunch of idiots who are unaware of economics? We're not talking about sending coats to Africa. We're talking about giving them to communities where these stores exist. And if you are going to still claim that this waste is "essential" to profiting in the system, then we need a different system. There is no excuse for this kind of waste. NONE.

Guest's picture
Shane

First, I would like to thank you for your comment because it gave me something to think about.

Second, I would like to ask you a question. Would these companies really loose out by changing the type of write off they were receiving?

What would they really loose by not claiming the write off from the insurance company and instead accepting the the tax write off they would receive from donating the "waste" goods to some form of charity or nonprofit organization?

If its all simply in the finances which are black and white, then what are they realisticly loosing? The amount of money gained from the insurance claim should equal the amount that would be gained as a tax write off.
It is my understanding that many of these companies actually donate money out of their pockets so that they may receive a tax write off anyway. So why not keep the money in their pockets and allow their "waste" to give them the tax write off?
Not only would it save them time and effort, "time is money", in many ways, but it would also make them look better in the public eye. It's proven that people feel better about spending their money at places that help themselves or others and are more likely to actually spend more in such establishments.
So in the end what is actually lost, and more importantly what could be gained?

Thank you for your time and I look forward to a response.

One last thing, food for thought... What is truely more childish, having a discussion on how things could be made better for both parties involved or dismissing all because in your opinion there is only one way and all other ways are simply wrong?

Guest's picture
Guest

What I think is that it sounds so wasteful that it tarnishes their reputation in a major way. I have boycotted stores / restaurants (like forever) for less that this. They need to think again -- and quick!

Andrea Karim's picture

The issue here, and the one I think that Bill was attempting to make when he's not blaming liberals for poverty and starvation, is supply and demand. If a company like Walmart has excess product, and gives it away for free, they are flooding the market and driving down their (already insanely low) prices, leading to lost revenue. People wouldn't BUY stuff if they knew that the store would eventually give it away for free. I'm sure that Walmart has done a cost-benefit analysis and decided that it was a better option to destroy goods than to drive down retail prices by giving things away.

I don't think a "free" rack is a good way to handle something like this; companies (all kind of companies, not just retailers like Walmart) need to be careful about avoiding over-production. It's a tightrope act - one one hand, you don't want product shortages that lead to customer discontent, but on the other hand, you don't want dead stock either. The key to profit is in understanding your market and producing more efficiently to begin with.

 It should be noted the Walmart says that they normally donate excess clothing to charity and that it was a contractor that destroyed the good mentoned in the article.

Guest's picture

Another option - an H & M Outlet where they sell unwanted merchandise at a slashed price...That's what Saks 5th Ave. & Nordstrom's do -

Goodwills around me have a lot of new Target merchandise (presumably donated)- which certainly raises my opinion of Target - I am sure H & M could donate that extra clothing & manage a tax deal....Or offer special sales with very low prices - $5 an item? Some smaller stores do that on their own initiative. I found myself buying a $6 H & M cocktail ring - why not more sales deals??

Guest's picture
Merrily

My boyfriend worked for a national book retailer and was not surprised to find out that H&M and Walmart are doing this. He said they would destroy loads of magazines and rip the covers off of books. Companies do get a tax refund on these "damanged" goods and do this to prevent people from dumpster diving.

http://us.kpmg.com/microsite/taxnewsflash/2009/May/09217.html

Guest's picture
Guest

This is true. Any magazines that are unsold by the time the next issue comes out are recycled with the big blue box store. They know nobody is going to buy last month's issue and, while they lose money on the unsold ones, they at least get some money back for them and then the old mags are recycled.

They are not, as some might say, just thrown in the dumpster!

Guest's picture
Guest

Yes, I work for a book vendor, and weekly, I rip the covers off MANY books, just so we can send them back for less shipping cost. (they are all paperbacks only.) The rest of the book gets recycled, which is good, but still...what a WASTE!! They should (they have to have some sort of record of which books didn't sell, so they need the cover and price info) really donate the stripped books, so other people who did NOT have $7.99 to read a book, CAN read a book!
I feel so wasteful when I stand there and rip the cover off book after perfectly new book!
There's gotta be a better way!
(oh, and lots of times, the coverless books are NOT recycled. Plenty of times, they've gone straight into the trash compactor at the store.
I cringe everytime!!!

Guest's picture

I worked in a Waldenbooks while in college. It killed me to dumpster (no recycling then) all those paperbacks. I could have cried.

Guest's picture

I volunteer with a small local charity in Ocean County, NJ. We provide quality of life essentials to those in need.

A local Wal-Mart has been wonderful to us, we get bags and bags of clothes, housewares, baby gear, whatever. They've donated photo processing services and their employees have helped at our events. I think it's because the store manager and a key employee or two is willing to put in a little effort. They bag everything and set it aside.

While one of the employees chooses to deliver it to us, we would gladly pick up this merchandise.

Any charity would bend over backwards to get brand-new Wal-Mart gear!

Guest's picture

In my experience, a company can give things for free without having to worry that they are falling into the wrong hands (either people selling them, or people who could afford to purchase). They have to give them to legit non-profits.

Most, if not all, of the groups we partner with have screening programs to ensure that the recipients of donations actually are in need.

I don't often get to see the recipients in person, but they do write to us and when we do see them, I can attest that these people are THANKFUL that there are groups out there to help them. Nobody LIKES taking handouts, no matter what people think.

Guest's picture
Maria

I have been told by a neighbor that works for Wal-Mart that this is what they do - they destroy perfectly good merchandise - clothes, toys, lawnmowers - it all goes into one of those huge super-shredders that shreds everything. Don't know why. Wal-Mart does some good things for the communities in which they have their stores. I'm not sure why they just don't donate the stuff.

Guest's picture

I'm not sure why shareholders would care how Walmart got rid of the clothing. If they donate it, it reduces their tax liability. If they destroy it, it is written off as worthless inventory and if they sell it for nothing its just the same thing. All reduce their tax liability. I'm not sure of all the tax laws relevant for Walmart but if they have useless inventory that won't sell, it just gets written off.

The big difference is keeping their normal customers from getting free merchandise that precludes them from spending in the future at Walmart. That's what shareholders would care about. Whether we like it or not, any new clothes given away will inevitably reduce future demand. Much of Walmart's customer base probably does some shopping at a charity thrift store (a really good idea for those who want to save some serious bucks). If it became a widespread practice, people like us would all start writing about how to get Walmart clothes at 90% off.

Maybe what Walmart should do is donate all the leftover clothes to charity in geographic locations where they don't have a presence and their competitors do. Nothing like flooding a competing market with new, super low cost, perfectly good clothing. They could do this while getting some great PR and secretly work on weakening their competition.

With regard to the leftover inventory buyers like Marshall's or Ross, etc. The problem is that they aren't going to buy Walmart quality clothes. They like to buy higher end stuff and then sell it cheaper to a customer group that isn't willing to pay $195 for a dress or $85 for a pair of Jeans. The fact that Walmart is throwing them in the trash tells you that there aren't any buyers for this level and type of merchandise.

Guest's picture
Marcie

I can understand why some retailers destroy clothing as its supposed to keep the items from being returned -- especially ones with tags on it.
When I worked for Disney and we would routinely cut off tags as well as cut the size tags off so we would know not to return them for cash. Then they would be happily donated.

I also worked for awhile at Barnes and Noble at they too don't recycle books or magazines and its so wasteful. (some may, but the one I worked at didn't)

I agree its a huge waste and if its such a big deal to retailors and their bottom line they should consider donating their overstock to charities that can ship them out of the country to those REALLY in need.

Guest's picture
Guest

Why would anyone buy anything if they could get it for free? It seems none of the businesses are run efficiently. Prices and inventory are too high to begin with. It's like with income tax. Ideally you should not owe taxes, nor get a big refund.

Guest's picture
Guest

IKEA throws away alot of perfectly good stuff into their wood and metal bins behind the stores. They try to put some stuff together and sell it, but alot that is too much trouble it tossed.

Guest's picture
Guest

Grocery and restraunts toss food thats ok. If these places made these items readily avaliable who would buy it? Its more profitable to toss items and get a credit, than to attempt to sell it or give it away. They also believe it could lead to employees or consumers "damaging"stuff so they can get it free or at a discount.(I've witnessed this)

Guest's picture
Guest

There's a surplus of goods, and the only way to maintain profits is to create scarcity.

Guest's picture
Cidre

I think people who don't work retail don't "get" this. It's just something I've been amused about for the last couple of days, really. Most of the clothing is being destroyed to cut down on employee theft. Period. Fullstop. Internal theft is HUGE, and there's quite a sense of entitlement among lower paid retail employees.

The "no returns without a receipt" suggestion also amuses me since other writers on this website would probably be the first to bitch about a store saying no to their return after they lost their proof of purchase. Marking stuff that goes to places like Marshalls' and Ross doesn't guarantee crap, sorry. I get, at least once a week, someone trying to return damaged returned merchandise they've picked up at discounters and throwing a fit because, no sorry, black/no tags. Also, if people know they can get something for free, don't think they won't do it, wait it out, etc.

Guest's picture
Christie

Why do we have such a sense of entitlement that "if they're not going to use it, I should get it"! It is not our merchandise to dispose of or even have any say over whatsoever.

Do I like getting name brand things at a discount store with the tags still on? Yes, but as H&M said in a statement, they do give away what they deem safe and what is in accordance with their guidelines. We shouldn't be criticizing companies who feel that they have to destroy merchandise because there are those who would use a system like that to cheat and exploit it for their own profit and gain. You know that is true. There are some people who get excited when the bank gives them too much money back and they don't return it. Do you really think that someone won't try to return these new discarded things for cash? A lot of someones? Less headaches for these companies to do as they've been doing.

Guest's picture
PHIL

Is the tax break for unsold merchandise any higher than the tax break for charitable donations? The media coverage of stories like these is welcome. public pressure and shopper pressure can help change this wasteful practice.

Guest's picture
Walter Daniels

To be terribly blunt, they do not just "get a tax write off is they destroy it." Back in the Clinton administration, tax laws were changed. It became more advantageous to destroy immediately unsold inventory, than to keep/donate it. If the donate it, they get the value of what they paid (wholesale value). If it is destroyed, they get *retail* value to write off. That means from 20-80% more in write off value, for companies.
Don't like that companies have to pay attention to that stupidity in the laws? Vote out the morons, AKA incumbents (with apologies to the real mentally retarded), in Congress of both parties. Then, contact the companies and say. "If you donate unsold merchandise to charities that can use it, I will be sure to shop with you." They pay attention to the bottom line. If they don't, the Feds hit them for "Failing to exercise fiduciary responsibility." That means every executive charged loses everything, and goes to jail. So, they don't have any choice, about what to do.
If you want it to change, then change the spenders in Congress, and give them (companies) a positive reason to do it differently. Otherwise, you are part of the problem, not part of the solution.

Guest's picture
Deborah

I personally can't stand that these companies are doing this. To anyone actually defending these companies, I thought I'd bring a little something to your attention:

It's not just about helping those in need. Though I think it's ridiculous to not give someone a chance at a better life if you have the ability. Clothing that get's thrown away is a WASTE of resources and DAMAGES the environment. Imagine how many clothes are sitting in landfills right now. There's no reason to waste valuable resources; if people keep wasting then one day we may have NONE.

Just a little food for thought.

Guest's picture
Lucille

This boils down to two key issues. Not wanting to hurt their brand image and fear of losing sales. Any brand with a level of status does not want their clothing showing up at a thrift store or being paraded around town on someone shuffling down the street with a shopping cart. I find that petty but that is their business angle, right or wrong.
If someone can get a "brand X" item for free or for 50 cents at a nearby charity store that is one less person who might come in their store for that item. In reality the impact is too vague to really matter. To bean counters in huge corporations it matters because the only thing that matters in money. The environment and other people simply do not matter to them.

If you stop and look around at the sheer amount of merchandise in most stores and how much of it is poorly thought out junk you see the real problem. It bothers me to look at the clothing department at somewhere like JcPenney and see rack after rack of horrible looking faddish junk that maybe only half of it will ever be bought. Companies need to do a better job of buying what people will purchase rather than loading stores with as much as possible.

Guest's picture
Guest

Well it looks like once again the only way for companies to do the responsible thing is to make it more financially advantageous for them. I am absolutely sickened by the way big business in this country conducts themselves, not to mention they've got our entire government in their pocket books. If you'd like a real eye opener on the extent of which big business and government are in bed with each other check out "Food, Inc." It's beyond anything I would have ever imagined.

Guest's picture
guest

walmart has been claiming to be "green" and eco fiendly for sometime now. If thats the case they wouldn't be destroying perfectly good items. Walmart of all companies should not be afraid of the lack or loss of money because they have plenty to spare. But since they are why dont they open a Walmart outlet store in just a few locations where all the left over merchandise can be shipped and sold on discount? Then they wouldn't be loosing any money. They can open them in other countries where people are to poor to pay regular price.

Guest's picture
Guest

what about doing what other stores do by either crossing out their tags with a marker i know some stores do that i have purchase some from forever 21 and they have either the name crossed out or cut out in half sometimes both.... come on they need to think of the needed people. at my church we are always looking for donations for the neede and you r telling me this stores dump them in the trash. what a waste....so sad:(

Guest's picture
VM

They destroy the items so that they can write them off and get a higher return on them when they write them off then if they donated them or just gave them away. It is all about making the most out of a bad situation, in order to write off the product they have to be destroyed, literally torn up and thrown away. It sickens me that this happens as I too would rather see them donated but until a large group of people are made aware of this situation nothing will change.

Guest's picture
Guest

I'm sure places like Wal Mart give to charity already in ways that won't destroy their business. If people knew that their clothes were eventually going to be free, no one would need to buy them.