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
The economy of luxury products is a bit weird because the more expensive they are, the more sought after they become (of course within their range). It’s because the luxury items function is not to bring you a good cost : value rate, it’s either self-rewarding (think of an expensive drink after a well done job), or representing.
Fast fashion clothes can afford and they do sales but luxury brands cannot because if a $1000 bag shows up at $250, then it’s a $250-bag from now on, basically retrospectively devalving each item sold previously at 1000.
So because the only role of a $1000 bag is to show that I can afford a 1000 dollars disguised as bag just hanging in my hands, once it’s known to be $250, it won’t do that job anymore. Therefore a luxury brand never can sell excess inventory for cheap, and some of them are actually meticulous about destroying.
But then why fo they make more? Because their margin is huge. Basically it costs a couple of dozen dollars to produce a 1000-buck bag. So if you overproduce by let’s say 10-15 pieces, then it costs you maybe 400, while if you cannot serve just one single customer because you made one bag too few, then it costs you a missing profit of 900 or so. Even worse, your lost customer goes to the competition. For the company it’s so much worse to have a little less items made, than a few extra, so they knowingly overproduce.
In order to write it off (at full value) for tax purposes it has to be an actual-loss (Eg, destroyed).
So at the point where the potential income from discount-sale or liquidation is less than the per-item tax benefit of a write-off, it gets thrown away.
Selling something cheaper dilutes the brand, making people less likely to pay full price. The item costs a pittance to make, the value is the label.
I run a small tech hardware company, and we regularly clear out/dump/ewaste tech gear that’s perfectly functional. There’s a few good reasons behind us prefering to dump rather than sell at a heavy discount:
– Seling at a discount encourages our customers who are otherwise happy to purchase at full price to hold off with their purchase, waiting for a discount if they know it’s going to come, in effect losing us ‘full price’ customers.
– We dump quite a considerable amount of stock, I won’t go into the specifics of what we sell, but there’s a lot more stock avaialble than there is demand for it, so trying to clear it all without dumping will flood the (local) market.
– The biggest reason for us is actually quite frustrating, it’s very difficult to reset consumer expectations to align with what the price they pay. Some of our most demanding customers are those who spend the least, we’ll have customers spend 10-20k+ and are the easiest people to work with, the sale goes through without a hitch, then as a point of comparison, where we have discounted stock down to ‘clearance/get it sold’ pricing in effect, all the Karens come out at once, expecting 10-20k service, and it’s this part that’s draws us the largest loss.
For many businesses, mine included, these practices are built up over time and experience, everyone starts off with a generous heart, as bluntly as it is, it’s the assholes that turn it cold. If there was a way to realisticially export this stock, at no cost to ourselves, to less priviledged markets, where it wouldn’t flood our own, we probably would (and I expect some of the eWaste companies do).
the manufactures don’t have retail space. They can’t just lower the price and discount it. They donate it and take a write off at full retail value. Then the donation station sells it in bulk.
Cost of storage is the big one. Rent a storage unit for $200 a month, then try to cover that cost with an Amazon store sell 300-500 items a week and you realize that it takes a bigger chunk than you realized. Costs don’t go down when you scale up. Inventory that won’t sell just takes up space in a warehouse you pay for by the square foot
Think of it like inventory slots in a game. You’re half way through some area and run out of space so you dump all the low value loot so you’ll have room to pick up better stuff.
There’s still value in the stuff, but you have a limited amount of space and there’s other stuff that’s more profitable than whatever loss you could offset by discounting the stuff that’s not selling.
I was always under the impression that it was due to tax rates at a corporate level: writing off a discarded product gets more than a write off for donating it.
I can see by the replies so far that it’s a lot more complicated than that, but does the tax diff have any bearing?
Back when I used to dumpster dive, there was one dumpster that was always packed with frozen pizzas. It was great. A little while later, I was working a temp job in the same building as the frozen pizza dumpster. One day some guy comes by with a pallet full of the stuff and asked if anybody wanted some. I asked why they were always throwing away so much frozen pizza, and they said that it was because they ordered it by the truckload, but didn’t have enough space for the whole truckload. He also said that if they ordered it by the pallet that it’d be more expensive.
My mother had an uncle who ran a store in the 60s and she got to read almost any comic book she wanted a month or two late. The only issue was she never saw the covers, as they were ripped off the front and sent back to the supplier to have evidence they weren’t sold.
It is weird to think of comic books being heavy, but I’m sure it all adds up.
The biggest example I can think of is the pullout from Afghanistan. No comment.
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