Uchikura & Co., LLC

A Store Full of Clothes — Does This Business Model Really Work?

 

Every time I walk into a clothing store like GAP (and I am not picking on GAP specifically), I am always amazed at the number of clothes they have.

 

Shirts, pants, jackets, sweaters — everywhere you look there are racks and tables filled with merchandise. Thousands of items are displayed in a single store. When you think about how many stores a company like this operates, the number becomes enormous.

 

And it makes me wonder.

 

Do they really sell all of this?

 

Realistically, the answer is no. Fashion changes quickly. Seasons change. Styles come and go. Some sizes sell quickly while others remain untouched. Many items eventually end up on clearance racks with heavy discounts.

 

Some inventory moves to outlet stores. Some gets sold to discount retailers. Some is shipped to other markets where it might still sell. But clearly a large portion of what is produced never sells at the original price.

 

From a business perspective, this raises a serious question.

 

How sustainable is this model?

 

Producing huge quantities of clothing, shipping them around the world, displaying them in stores, discounting them, and then eventually liquidating the leftovers — that is a massive amount of cost and effort.

 

When I see stores full of clothes, I cannot help but think about how much of that inventory will actually be worn by someone and how much will simply move through a chain of markdowns until it disappears somewhere in the system.

 

Retail stores look full and impressive, but behind that display there may be an enormous amount of overproduction and waste built into the system.

 

I don't know how to even manage or imaging this type of business.