What do you do when you when you need to rein in your shopping habit? Clean out the closet and try to make your old stuff feel new, right?
Retailers are trying the same tactic.
Here's the deal: Gap and Kohl's, among others, are stuck with a glut of extra clothes that they can't sell at current prices and don't have a ton of space for. They're overstocked. But rather than slashing prices to try to move the inventory, they're just going to try again next year.
It's a strategy known as "pack and hold." (Though I might call it "pack and hold and pray customers don't catch wise.")
Gap, for one, is stashing summer styles that didn't sell in 2022 and hoping to try again next year. Kohl's is holding on to an extra $82 million worth of inventory, including sleepwear and fleeces, that it plans to peddle anew for the holiday season.
The reason: Retailers have too much stuff because we the people pulled back on spending on fun things like clothes as the cost of boring things like groceries and gas and rent have gone way up.
Clothing is a particularly strange sector, too. People are emerging from work-from-home life, aka Sweatpants City, and preparing to go back to the office. But for many, it's not clear what the workwear vibe will be in the late-pandemic era. We may not want to splash out on a new wardrobe just yet.
So why don't Gap and Kohl's just slash prices? That's a tried and true way to move inventory and free up space, but it can also dilute the brand, my colleague Nathaniel Meyersohn explains.
Or, as one industry analyst put it: "Promoting can be cheap today and very expensive tomorrow."
Holding onto merchandise isn't cheap, and retailers run the risk that fashion will move on and make old wears look painfully out of date. But if retailers hold onto the right stuff — your black T-shirts, your comfy denim shorts — they may just buy themselves time. Heck, Gap might be able to sell a two-year-old tank top at an even higher price point if demand goes back up.
Forecasting demand is a tricky game, though.
On the bullish side: Consumer confidence appears to be rising again after a three-month decline, according to a new Conference Board survey. And thanks to falling gas prices, Americans are feeling a bit better about things.
The bearish take: Overall, Americans are still pretty worried about the economy and think we may be heading toward a recession. Those perceptions are important because they affect how we spend, especially on clothes.
RELATED: Walmart, Target and Bed Bath & Beyond are all struggling with an oversupply of merchandise and lack of demand for items such as furniture, electronics, home decor and clothing. But those are exactly the categories that are in high demand in the secondhand marketplace, according to an online resale industry report.
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