My wife has been addicted to watching dumpster diving videos where people end up finding brand new expensive things thrown away by retailers. It made me remember reading somewhere that the reason they do this is because it’s cheaper for them to throw away or destroy their inventory than it is to give it away or sell at discount. HOW???
I don’t see how they could possibly save money by destroying inventory rather than putting it on extreme discount. Surely they could make more money selling at an extreme discount versus no money at all by destroying .
In: Economics
A few reasons:
– By the time the decision is made to throw it away, it’s usually already been on discount for awhile and didn’t sell. Rather than continue waiting, they cut their losses and trash it.
– Some stores would rather throw it away then sell it *too* cheap because it encourages people not to pay full price. Folks just wait around until it goes on clearance for super cheap.
– Some brands have price restrictions that don’t allow a store to sell the item for less than $X, because doing so would “cheapen” their brand name.
– Many items are seasonal and once the season is over, the store knows it won’t sell until the same time next year. Storing something for a year takes up valuable space that could be used for more profitable inventory.
Friend at 3M was once giving away little plastic trays and copper/zinc discs from project that was ending. He had boxes of these.
Transferring these items to other projects would involve accounting labor to correctly allocate expenses and debit original costs. Also manual labor would be involved in moving items. Even admin labor is involved in approvals and updates.
While its possible the expenses are less than the items saved, there are imtangible costs associated with making everyone involved life more complicated.
As a former industrial contractor, I would see some of my customers throw out tons (sometimes literally) of spare parts. Usually sent to scrap dealers, but not always. When I asked, I was told that it was done to avoid paying taxes on the stuff. Seemed crazy to me, but what do I know?
Have you ever had items you didn’t want and it was less trouble to throw it out than to bother selling it, or the cost of shipping it would be too high?
It’s mostly that. Also companies like to have losses to offset earnings and minimize taxes, and fancy brands don’t want people to realize how cheap their stuff is when they sell a $500 item for $75 so it also makes sense to just have a loss.
Not a common occurrence but for some industrial equipment, if they were custom designed for a certain client and there end up being some dead stocks, these cannot be resold to another entity due to contract and legal issues.
Other times, if these equipment require some sort of certifications, getting them recertified for a client with different environment or for different country may end up being more expensive and time consuming.
I didn’t see it referenced but brands do have prescribed pricing. Ie: Apple tells retailers what the price is for their product and the retailer can lose the right to sell that product if they do not follow the instruction of the manufacturer.
An important factor is insurance. people might not realize it but everything is insured in business, and that insurance-payout isnt taxed in the same way.
There are a lot of reasons.
Sometimes a brand wants to stay expensive, for their image, and sales can hurt that
Often selling things at discount means you’re directly competing with yourself, and someone buys a discounted item instead of a full price item
Other times having sold something cheap slows future sales because “it used to be X”. People are often bad at judging real world value but “X is more than Y” is really easy
Often even selling things at discount is slow, meaning you’re taking up space. That can be a rental cost or it can be an opportunity cost- some companies run out of very tight spaces
In some regimes you can declare it as a loss and benefit from that in various ways. (the company I worked for had one bad year and they dumped about 10 years worth of bad decisions in that one bad year, making for a bigger single year loss but also giving them a better-looking recovery the next year. Investors have short memories)
I used to work at a food stand selling hot dogs. At the end of the day we could either throw away or eat the leftovers, but we were explicitly told we cannot give them away. The whole logic was pretty straight forward –
1 – people are going to feel like they got ripped off if they buy a hot dog and then hear us giving away free hot dogs to the rest of the crowd
2 – once they realize it’s free hot dogs at closing time, they’ll just wait until then to eat
3 – it helps discourage people from making extra to give to friends/family
Obviously you aren’t talking about food, but the same could go for something like shoes or bags that go in and out of style. If there’s a new version of Nikes that comes out every January and you know for a fact that last year’s will go on sale for 90% off, you’ll just always buy last year’s instead. If they throw last year’s in the garbage you’ll be forced to buy this year’s at full price
Product takes up space and space in a retail store is expensive and finite. You’d be shocked to learn what it costs to get a 3″ x 3″ space for your toothpaste on the shelf at Target.
So if you have product that the company that produced it isn’t supporting anymore and isn’t promoting anymore, you have to put it somewhere. Wherever you put it becomes, effectively, dead space. It’s not generating profit because the stuff in it isn’t selling, it’s not creating new income because you can’t sell shelf space that’s already occupied, etc.
Plus the retailers that don’t specialize in marked down merchandise kinda hate the appearance that it gives off, and I do understand why. Target, to stay with the example, tends to put all their clearance stuff on one back of the aisle endcap because it looks bad for a store that’s promising to be the place you go to get whatever is currently hot and trendy to have markdown tags all over the building.
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