Target Corporation (TGT) has decided to remove merchandise from its upcoming LGBQT Pride collection because of objections from right wing critics.
Fortunately, retailers have lots of experience getting rid of unsold apparel, whether by selling to off-price retailers like T.J. Maxx or Marshalls, both owned by TJX Companies Inc. (TJX), or just relegating clothing to landfills, which is not really good for the environment.
DON'T MISS: Frustrated Target Designers Speak Out After Company's Latest Move
In Target’s case, the retailer will most likely -- and very quietly -- donate the merchandise to charities or foundations, possibly aligned with LGBTQ+ causes.
“I'm guessing that (the clothing will) end up being donated,” said Jane Singer, managing director of Inside Fashion and JDT Research in Hong Kong, which tracks the international apparel supply chain. “They can't sit in a warehouse because warehousing costs are very high. Also Target needs to get that inventory off of their books to free up 'open to buy' dollars so that they can buy new merchandise.”
“There are a lot of lessons in these recently failed collections for the industry,” she said.
Collaborations Gone Awry
Over the past years, retailers have partnered with outside designers, including celebrities, to create collections of apparel and accessories. The goal is to create exclusivity and excitement for stores to stand out in an industry known for its intense competition and low profit margins.
But we’ve seen plenty of misfires. Sometimes, the partnership seemed mismatched from the start: witness Jennifer Lopez and Marc Anthony’s awkward collaboration with Kohl’s Corporation (KSS) more than a decade ago.
And occasionally, the celebrity in question can go off the rails. Hip hop artist and designer Kanye West struck deals with both The Gap Inc. (GPS) and Adidas (ADDDF) to create clothing and sneakers. But his erratic behavior and incendiary social media posts forced both retailers to sever ties with him, leaving the companies with lots of unsold Yeezy merchandise.
The German sports brand was sitting on more than a billion dollars worth of unsold sneakers. Last week, CEO Bjørn Gulden announced that the company will resume selling the remaining stock of West’s Yeezy line and donate its proceeds to charity.
“Adidas struggled with what to do with the Yeezy merch for many months,” Singer said. “A lot of kids would be thrilled to get a pair of high ticket Yeezy X Adidas shoes - for free. I suppose they could then write it off as a donation and use some of their corporate social responsibility budget to cover it.”
As for Target, the retailer hasn’t disclosed how many products it plans to pull from the Pride collection. Target also declined to say what it will do with the merchandise.
“We don’t have anything to share on this right now,” a company spokeswoman e-mailed TheStreet.
Little Financial Impact
Unlike Adidas, Target’s financial fallout is likely miniscule (although pulling products at all 1,954 stores across the country is no small thing.) In general, the retailer likes to keep its inventories lean.
In fact, executives during its recent first quarter earnings call credited its low inventory (16% down from the same period 2022) as the reason profits remained stable despite an economy marked by inflation and lower consumer spending.
The low inventory also gives Target the flexibility to strategically invest in categories where the company believes it can grab market share throughout the rest of the year, including beauty and back-to-school and back-to-college seasons in the fall.
Target likes to employ time-limited collections to draw people to the stores so they can buy other items. The LGBTQ+ collection only lasts during Pride month in June.
Keeping such collections small also creates the allure of exclusivity. Consumers love to buy and own things most people can’t get.
And unlike Adidas and West, the designers who created Target’s LGBTQ+ collection are relatively unknown. Target excels at identifying up-and-coming designers who operate below the radar. For example, the vendor whose products Target definitely is pulling is a little known British brand called Abprallen.
Since the fallout from Target’s decision, Abprallen has disabled its website.
“This shop is temporarily on hiatus,” a message reads. “Thank you for all of your support and love. The positivity and beautiful vibes you have sent this past week have been overwhelming and I can’t thank you enough.”
“I am putting the shop on a short break while I catch up with all of your orders! See you soon!”
Target might have escaped serious financial consequences but suffered a pretty big blow to its reputation. The retailer practically wrote the book on exclusive design partnerships, most notably its collaborations with Michael Graves, Isaac Mizrahi, Kate Spade, Missoni, and Jason Wu.
However, the retailer has occasionally faltered. In 2011, Target announced a major holiday collaboration with luxury retailer Neiman Marcus that featured 50 products from 24 prominent designers sold at both chains.
But the collection was a dismal failure as consumers balked at the high prices. And unlike the LGBTQ+ Pride collection products it pulled, Target couldn’t just hide the inventory: to get rid of the collection, Target and Neiman both had to heavily discount the merchandise.
Comments about the story? Send Thomas an email here.
