The European retail giant, H&M, has been struggling the last few years as sales decline. Their fast fashion model demands that they order and stock clothes month-to-month, leaving little room for error. The company faced a 62 percent decline in sales during the first quarter of this year, meaning they are stuck with a massive $4.3 Billion stockpile of unsold inventory that is no longer desired by customers. The company is debating how to deal with the excess in the midst of a record loss in profitability. A report by Euro News was used for much of the information presented in this article.

Discount it

The first and most obvious solution is to try to sell the clothes for less than retail price to recoup some of the loss. This solution, while it seems obvious, isn't as simple as it sounds. The stockpiles are spread across the globe as warehouses and transportation centers which make it hard to coordinate, and if you've ever been in an H&M, you know there's not a lot of floor space available for discount inventory.

By the time the Clothing gets to where it needs to go, it'll generally be out-of-season and difficult to sell, even at a lowered price. There's also the costs associated with organizing, pricing, and displaying clothing that might not ever sell. These costs, just to try to lessen the loss, might make it more expensive than some other options.

Burn it

While this may not sound like a reasonable option, it's actually been done before, according to Quartz Media. Sweden, the homeland of H&M, has been a part of the "recycling revolution," where they, along with the other Nordic countries, have been trying to reduce and reuse more than anywhere else in the world. One major part of this is burning trash for energy.

Sweden claims that a ton of trash has as much potential energy as a ton of coal and if extracted correctly, the solid waste can be turned into energy with less pollution than standard non-renewable sources. If H&M decides to go this route, they will end up with a net loss, but it might be better for the world than simply discarding the clothing.

Donate it

Many people in America donate their old clothes to their local second-hand store, so is it possible for a mega-corporation to do the same? Potentially, but not without its downsides. If H&M decides to take the charitable route, and donate much of their surplus to low-income nations, they could actually be doing harm to the people they're trying to help.

Paul Penley, Ph.D., a researcher with Excellence in Giving, notes that clothing donations might have good intentions, but actually end up harming the local economy, which is usually already disadvantaged. If you think about it in local terms, the regions clothing is often donated to are extremely poor and don't import much of their textiles.

This means if $4.3 billion worth of clothing enters their extremely small clothing market, local businesses will have to compete with a free service, causing them to go out of business. If H&M decides to donate their excess supply, they will have to be extremely careful to not hurt the regions they donate to. This care will drive up costs, making it unlikely H&M will take this route. So what is H&M to do?

Reuse it?

H&M is famous for their discount program, whereby any customer can bring in any old clothes for H&M to recycle and the customer will receive a 15 percent discount on their next visit. It's almost unfeasible that H&M could do this will all their unsold inventory, but some may work its way back into stores.

This would at least save some costs on purchasing raw materials for next year's lines. The problem isn't going to go away and it'll likely change the way H&M does its procurement in the future, but for now, it's just a huge profit-sink for an already cash-strapped company.
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