This article is part of our series on small companies with a big mission in five areas: women, kids, community, planet, and hope. Click here for more articles in the series.
In July 2018, British luxury brand Burberry revealed in its annual report that it burned 28.6 million pounds—valued at about $37 million—of its own merchandise.
The news was widely reported and caused quite a stir, but the Burberry case was hardly unique. From tax incentives to brand positioning, there are plenty of reasons that companies sometimes decide to destroy their excess inventory.
From a distance, Jeannie Barsam witnessed some of that waste during a corporate career that included executive gigs at Gap, Zales, and Talbot’s. As a retail insider, she understood the market forces at work, but she was convinced there must be a way to leverage these overstock products for unusual impact.
That was the impetus for Gifting Brands, the first social enterprise that converts the excess inventory of luxury and upscale brands into funding for nonprofits that are helping women, children, and families.
It works like this: The website sells boutique fashion and jewelry items for both women and men, with many items discounted 25% to 75%. Those discounts are possible because companies donate the products free of charge in order to take a tax deduction. So, shoppers get a great deal, brands find new customers, excess inventory stays out of the landfill, and Gifting Brands passes along 100% of the profit to its charity partners.
That looks like a win-win-win-win, and naturally we wanted to find out more.
From Destruction to Donation
Forecasting consumer demand is more art than science. In an ideal world, companies wouldn’t manufacture more products than they can sell, but once they’re made, they’re made. Unsold inventory is an expensive liability, and the US tax code offers three ways that companies can mitigate the pain to some extent: Donating to a charity, selling at a loss to a liquidator, or destroying the merchandise altogether.
In her Zales tenure, Jeannie didn’t encounter anything quite as shocking as the practices that got Burberry into hot water. But that partly owes to the nature of jewelry. “[Zales does] a really good job of managing their excess inventory because they can melt the metal and reuse the stones,” she says. “But there were some products like watches or lower-priced products where the only avenue was to sell off to a discounter.”
From a tax standpoint, liquidation is more advantageous than destruction, but it does have its drawbacks. Mid- and upscale brands, according to Jeannie, are often reluctant to offload excess inventory to discount stores like Ross and TJ Maxx because doing so might damage the exclusivity that helps to justify the cost of their products.
So Jeannie is trying to promote the charitable donation option – something that might not be the obvious choice for giver or receiver.
For many charities, in-kind donations such as clothing can be an unwieldy proposition, and cash is what they really need to keep the lights on. These organizations could turn around and sell donated products to raise money, but without retail expertise or distribution networks, they’d likely leave a lot of money on the table.
And that’s where Gifting Brands comes in. Jeannie believes that her retail experience, combined with that of her board, can maximize the value of donated goods so that consumers are getting a great deal while charities are getting the biggest possible cash donation.
She calls her approach “inventory philanthropy,” and the brand-new website currently boasts nearly 150 products from seven launch partners including Charles & Colvard, Tori Richard, and R. Riveter. It’s a promising start, but Jeannie recognizes that the model is new, and expanding the collection is going to take time.
“In our conversations with [luxury brands], we often hear, ‘We love what you’re doing, we just don’t want to be first,’” Jeannie says. “A lot of big companies don’t want to be first. They would prefer to work with proven organizations. Consumers are now asking for brands to step up and be leaders in sustainability and social causes. Gifting Brands help solve this issue and gives brands a new way to make a difference through impact philanthropy.”
100% for Charity
Admittedly, there’s not a lot that an individual consumer can do to reform the practices or priorities of large corporations. However, we can all agree that any way to convert inevitable overstock into capital for small nonprofits is far preferable to diverting it to landfills.
Ironically enough, the global pandemic might just push more brands to try something new.
Worldwide lockdowns have exacerbated the retail industry’s perennial dilemma over what to do with unsold stock, with clothing sales plunging by more than 50% in the U.S. and Britain in recent months. Post-pandemic, a recent report from McKinsey & Co. stresses “the trend toward sustainability and the desire for more-responsible consumption” — factors that might work in favor of inventory philanthropy.
Convincing more companies to turn excess inventory into impact will largely depend upon how consumers take to the Gifting Brands shopping experience. And Jeannie believes she can deliver on that count, specifically because the impact model is baked in.
“People love shopping with companies that are giving back,” Jeannie says. “There just aren’t a lot out there that consumers know about. I know personally, I’m more likely to go back to shop if it helps somebody in need or a specific cause I care about.”
Giving back for Gifting Brands entails donating all profits to a charity of the month, starting with The Family Place, the largest family violence service provider in North Texas. Jeannie actually moved up the launch of Gifting Brands when she learned that The Family Place was seeing an unprecedented surge in demand due to Covid-19.
“Our goal is to have one new charity a month and limit it to 10 or 12 in the first year so we have a real relationship with the charities we’re working with,” Jeannie says. Like The Family Place, each new charity partner will be a smaller nonprofit that focuses on helping women, children, and families.
Spend for good: Visit the Gifting Brands website to shop their current collections, learn more about their charity partners, sign up for alerts as new brands are added, and stay abreast of deals and discounts.
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