Sustainability is at the forefront of all aspects of the supply chain in retail. From product development and production to shipping and returns, every aspect of the retail industry is working to become more sustainable.
Increasing these efforts is challenging, as many retailers frequently introduce new products to meet the demands of the constantly evolving consumer. On average, up to 20% of clothing goes unsold and is often incinerated. Additionally, returned goods create more than 5 billion pounds of waste in U.S. landfills each year.
CNBC recently published a video highlighting ways in which Google and data-driven platforms are helping retailers reduce the amount of excess inventory produced each year. Bill Adler, CEO, True Fit, was featured in the segment to discuss the power of data is resolving this industry-wide issue.
An Industry Shift
Brands have historically released new collections at the start of each season. In more recent years, the rise of fast fashion means many brands are introducing new collections up to fifty times a year, or on a weekly basis.
This constant promotion of new inventory and products has consequently increased the amount of waste within the apparel and footwear industry. If a collection does not appeal to shoppers, retailers and brands are forced to heavily discount or discard the unsold merchandise.
“Apparel is a $2 trillion market, which is the largest consumer vertical—much bigger than movies, bigger than music, bigger than books— although 30% of it never gets sold. And a lot of it ends up in landfills,” said Bill Adler, CEO, True Fit.
Some retailers have also resorted to burning unsold merchandise, as a way to maintain brand image and destroy unsold goods. As a result, excess greenhouse gases are emitted into the atmosphere.
How are leading retailers working to increase sustainable efforts internally? Many retailers are working to better understand their shoppers needs so they can create merchandise that is appealing and likely to sell. This will ultimately diminish costs related to excess products and the environmental impact of unsold merchandise.
Data and AI for Sustainability
In order to better understand shopper needs, retailers are optimizing their data collection and using artificial intelligence to better understand consumer behaviors and shift their internal strategies around these insights.
Access to consumer, product and transaction data enables retailers ability to better plan the types of items produced and the anticipated quantity. In turn, levels of excess inventory are greatly diminished as retailers can anticipate the volume of products that will likely sell.
“Our role in this was to organize billions of dollars of transactions from the retailers and thousands of brands feeding us their product data and consumer creating a [True Fit] profile. Returns are going to go down and people are going to keep what they love because we’re going to figure that out better. The combination of those two things should make production more efficient so there’s less going into a landfill,” said Bill Adler, CEO, True Fit.
Returns have always been a consistent pain point for retailers and brands in terms of added costs and overall inconvenience. The rate of returns in the US has increased in recent years to 25% for all online purchases, which is significantly greater than the 9% average return rate for in-store purchases.
By understanding consumer wants and needs, retailers are better able to plan their production processes to ensure the right products and being introduced to the right consumers at the right time. In turn, excess inventory will be diminished and consumers will find the products they will love and keep on the first try.
Watch the full segment below to more about the importance of data and artificial intelligence in improving sustainability across the retail industry.