Challenges Facing the Future of Consumption

One of the biggest challenges facing the future is how to address the environmental challenges ahead of us in the near future. Reports on global warming due to CO2 emissions, as well as on how humanity is exceeding planetary boundaries, have increased in frequency during recent decades (see, e.g. Rockström et al., 2009). Such problems are also mentioned by the media, activists, and the wider public, where the textile and clothing industry has been identified as contributing to this development. Along with Sustainable Development Goal number 12, there has been a call for action, for the industry to engage in more sustainable production and consumption.

Early academic discussions on corporate social responsibility revolved around aspects such as poor working conditions and the negative environmental consequences of production (see, e.g. Bartley, 2007). During recent decades, the discussion has shifted towards focusing on the overall environmental impact of the industry, with a circular economy being presented as the solution, together with the core concepts of reduce, reuse, and recycle (see, e.g. Stål & Corvellec, 2018). This research has mainly focused on the latter stages of the circular economy, for example, reusing and recycling, but less so on reducing the inflow of new materials. Moreover, although the idea is for companies, economies, and societies to move towards a more circular economy, our current society is still predominantly built upon a linear economy.

Two problems identified in current linear business models are overproduction and overconsumption. Overproduction has been defined as “the act or an instance of producing too much of something” (Merriam Webster, n.d.), while overconsumption has been defined as “the excessive consumption or use of something” (Merriam Webster, n.d.). On the one hand, large volumes are produced by the industry, while on the other, the frequent consumption of products is beyond what may be considered basic needs. While overproduction is closely linked to any efficiency issues a company might have, the term overconsumption instead addresses the idea of exceeding planetary boundaries.

In terms of overproduction in the fashion industry, research has focused on how to better forecast in order to achieve a better match between supply and demand. For example, using aspects such as lean manufacturing to reduce overproduction (Maia et al., 2013), and how overproduction is a burden for trade (Schrank, 2004). Another focus area has been waste and waste management, where a distinction has been made between pre-consumer and post-consumer waste (Koszewska, 2018).

Research on overconsumption has put the producer-consumer exchange in focus, with an emphasis on the end-consumer and on how consumer behaviour could be changed (see, e.g. Gupta et al., 2019). Other studies have investigated the impact of buy-now-pay-later (BNPL) credit schemes on impulse buying tendencies (Ah Fook & McNeill, 2020; see also Relja, Lifen Zhao & Ward’s discussion of BNPL in this book), which can also spur overconsumption. Yet another study has investigated the impact of online promotions and social media on consumers (Frick et al., 2021), also indicating that the end-consumer has been focused on in this stream of research.

Although much research has been carried out on overproduction and overconsumption, there are few studies combining the two. Overproduction is regarded to be linked to companies and overconsumption to end-consumers. However, products are not produced for the sake of production; they are placed as orders by retailers from suppliers. Without such orders, these products would not be made. Thus, overproduction does not happen in a vacuum, it is also part of a consumption culture—one that takes place within retail firms. Going back to the definition of overconsumption as the “excessive consumption or use of something”, this is not limited to an individual and should thus not be limited by only studying the end-consumer. There is already excessive consumption on the part of the company, and this chapter will demonstrate how it is also closely linked to overproduction. Hence, this study shows how overproduction and overconsumption are closely intertwined, and the difficulty of separating the two. By connecting the two with each other, we can also more easily discuss and address the challenges we are facing for future consumption.

Discounting as the Missing Link

Discounting is becoming a more frequent feature of fashion retailing, as well as several other retail sectors. The phenomenon of discounting is widespread, with only 30 per cent of clothes produced today being sold at full price, 30 per cent at a discount, and the remainder left unsold (Koszewska, 2018). Moreover, a recent report shows that 75 per cent of apparel purchases in the US were from off-price retailers (The NPD Group, 2016). Discounting is problematic for many retailers as it distorts competition and entails lower margins on each product, which has a negative impact both on the profitability of the firm and on the environment, as larger volumes are required to maintain the same level of profitability.

Discounting is an indication that retailers have made products that lack market demand. They cannot be sold at full price and thus need to be subject to price reductions to be considered attractive. Once the price has been reduced, they often become more attractive to the consumer, who tends to make purchases that might not have been planned. In this way, discounting is not only a sign of overproduction, but it also contributes to more consumption by the firm and spurs consumption among end-consumers.

Research on discounts has focused mainly on the customer responses to reduced prices (see, e.g. Jin & Kim, 2003), on pricing strategies (see, e.g. Caro & Gallien, 2012), and discounts as a driver of revenue (Ngwe, 2018). Nevertheless, discounts have continued to increase in frequency: Along with campaigns and offers, they are part of the day-to-day work of firms, but also the day-to-day life of consumption. Current explanations thus seem to have shortcomings as regards explaining how they arise, whether they can be reduced, and as regards linking discounting to issues concerning overproduction and overconsumption.

Aim and Research Scope

The aim of this chapter is to explore the link between overproduction and overconsumption by studying discounting and providing directions for the future of retail and consumption. This is important since there is a lack of research on that relationship, and where previous studies have been limited to either studies of optimisation (see, e.g. Choi, 2019) or consumer preferences (see, e.g. Lee & Tsai, 2013). Also, along with Sustainable Development Goal number 12, there has been a call for the industry to engage in more sustainable production and consumption. By taking a more explorative and qualitative approach to the research topic, this study has nuanced previous findings and added to the scholarly debate on sustainability and retailing. The study is based on findings from an ethnographic study of discounting in the Swedish fashion industry. The guiding research question was:

How do Swedish fashion companies use discounting and with what consequences?

To answer the question, three sub-questions were posed:

  • What are the types of discounting used?

  • What are the reasons for discounting?

  • What are the strategies used to reduce discounting?

By gaining insights into discounting, this research contributes towards informing academia and practitioners on how to address the problems of overproduction and overconsumption.

The first sections of this chapter account for different types of discounts, the reasons for discounting, and the strategies used for reducing discounting; in short, how they come to exist and how companies work towards dealing with them. After that, there is an analysis of how discounting relates to overproduction and overconsumption, which paves the way for some final reflections on whether discounts can and/or will be part of the future of consumption.

Design of the Study

This study sets out to address the backyard of the fashion industry by discussing the problematic aspects of discounting in terms of profitability and sustainability issues.Footnote 1 The material has been collected using an ethnographic study of discounting in the Swedish fashion market, between 2019 and 2021, consisting of 33 interviews with fashion companies, IT companies, entrepreneurs, and a member organisation. The IT companies were included due to their key role in supporting the fashion companies in technical solutions, as well as their broad customer base, leading to access to a greater number of companies in the industry. The respondents included two lawyers, three controllers, two business strategists, four retail and/or commercial managers, one operations manager, five sustainability managers, one multi-brand retailer, three entrepreneurs, and three CEOs of IT companies. The interviews lasted approximately one hour each and were all recorded and transcribed, resulting in around 27.5 hours of recorded material. Also, around 15 informal chats were conducted with sales assistants. Such interviews were spontaneous, not aiming to answer specific themes or questions, but rather to give insights from the point of view of the store.

Additionally, several observations were also carried out both in physical stores—structured and unstructured—and online on, for example, company websites, and social media. In total, around 50 observations were carried out in physical stores, and up to 10,000 screenshots were collected regarding communication on social media as well as company websites. Moreover, the material was also complemented with news reports by the media (e.g. Market, Habit, Dagens Nyheter, Göteborgs-Posten, and Svenska Dagbladet). This has resulted in rich empirical material and the writing of a thick description of the problem of sales and discounts in the fashion industry. The material was coded using line-by-line coding (Charmaz, 2014), and then thematised and conceptualised in relation to the previous literature in the field. Using a case study of discounting in the Swedish fashion sector, the aim was to better understand the link between overproduction and overconsumption by studying discounting.

Types of Discounting

Discounting can be done at several different times throughout the sales process. Traditionally, discounts have been a way of getting rid of products at the end of the season, using end-of-season sales, explained by one of the respondents as follows:

This is the essence of price reductions: It’s a way of getting rid of unsold products and converting them into money. Products that are left unsold are problematic, not only because they take up space in-store and in warehouses, but also because money is tied up in these products. Once products have been sold, both space and money are freed up, leaving companies better placed to procure new collections (Multi-brand retailer, Company B).

Hence, the original idea of the discount was to find a way of selling products that remained unsold at the end of the season, in order to make space for new products and to ensure the liquidity of the firm. In Sweden, there is end-of-sale discounting on at least two specific occasions: i.e. the summer sale and the winter, or Christmas, sale. This is generally complemented by additional mid-season sales during the spring and autumn. Lately, many retailers have introduced new types of discounts, for example, Black Friday, Cyber Monday and Singles’ Day. Some of the companies in the study choose not to have mid-season sales, but to have Black Friday instead (Companies A, B, and D). Based on the interviews, other types of discounting practices were also mentioned—for example, in-season reductions through campaigns and offers.

Discounting is a reduction of the full price, defined as “sold at the normal price, not at a reduced price” (Cambridge Dictionary, n.d.). Respondents reported determining the full price, either by calculating a fixed sales margin on the product or using other parameters, for example, weighted calculations within a fashion collection. The full price is generally communicated using black numbers, while discounted prices are often marked in red. Fig. 13.1 below gives an overview of when and where discounts take place today—consisting of three types of discounting practices: i.e. pre-season sales, in-season sales, and end-of-season sales (see also Şen, 2008, for a similar categorisation).

Fig. 13.1
A staircase model lists the strategies of pricing based on pre-season sales, full-price, in-season sales, and end-of-season sales.

A schematic showing different pricing strategies

Full size image

As shown in Fig. 13.1, the full price is only one of four types of pricing strategies.

To plan for both in-season and end-of-season sales, many companies regularly follow-up sales of specific product groups. For example, some companies reported working with campaigns and offers, to “activate” products or product groups and spur sales of specific products, as well as in between clearance sales (such as end-of-season and mid-season sales) (Companies C, G and H). This has led to a situation whereby the lines between the different types of price reductions are becoming increasingly blurred.

Reasons Behind Discounting

At the heart of discounting lies the question of excess production, which is often referred to as the balance between supply and demand. Equilibrium can be difficult to achieve as trends, the weather and other factors affecting prognoses can be difficult to foresee. Although prognoses are a major part of the problem, where it might be difficult to predict sales volumes, other reasons for price reductions were also given during the interviews. The reasons for discounting can be grouped into four overarching categories; i.e. procurement, financial and spatial, design, and market reasons (see Table 13.1, below).

Table 13.1 Categorisation of the types of reasons for giving discounts
Full size table

The first category, procurement reasons, is about buying the appropriate number of products, in the appropriate size and colour, and at the right time. For example, the summer collection is somewhat difficult to predict: “The challenge of the summer collection is that the weather conditions for these garments are rather limited, at least in Sweden and the Nordic countries” (Commercial Manager, Company C). As forecasting is difficult, one respondent concluded that the elimination of discounting can be regarded as a “utopia”.

Secondly, financial and spatial reasons, were exemplified by the issue of liquidity: “It’s better we sell now, get the money and buy new things” (Multi-brand retailer, Company B), as well as the need to “make space for new stuff, by getting rid of old products that aren’t attractive” (Controller, Company C). Another respondent reported on a similar line of reasoning: “We cannot keep everything, then we’d run out of space” (Wholesale Manager, Company A).

When it comes to design reasons, this was exemplified by a poor product fit: “It might not be the shirt that’s wrong, but the measurement needing to be adjusted” (Commercial Manager, Company C). Another reason is that design is limited to a short period, for example, Christmas sweatshirts, which will lose their attractiveness just after the Christmas holidays, at least until next year. In general, there is a feeling that, “The products don’t get more attractive with time—if anything it’s the opposite” (Controller, Company H).

Discounting connected to market issues has three aspects: First, products were sometimes planned to be part of a specific campaign. However, using discount periods, for example Black Friday, was often discussed internally, as expressed by one of the respondents: “We’d prefer not to be part of this gimmick, but we can’t afford not to” (Sustainability Manager, Company F). A second reason for reducing prices was attracting new customer groups. For example, the Retail and Wholesale Commerce Manager at Company A concluded that, “It’s much more cost-efficient to change the margins on our products […] than to pay for advertising”. However, reducing prices also comes with increased risks: “The most important thing is that customers return after buying discounted products and that they start on their consumer journeys”, the same person reported. Hence, companies do not want to build loyalty based on discounted prices, instead hoping to establish contact with potentially new and repeat customers.

A third reason was to retain current customers. The Controller at Company C noticed the downsides of discounts, whereby they felt that discounted prices were unavoidable: “Using coupons, campaigns and discount codes has led to a situation where we’ve taught our customers to wait for the sales”. By using discounts on a regular basis, the company felt its customers were never prepared to pay the full price, and thus it needed to continue offering discounted prices to retain its current customers.

In sum, there are various reasons for discounting, where the procurement of excessive volumes is only one of many. While faulty purchasing strategies can be refined through better prognoses, it is more complicated to address a faulty design, financial and spatial issues, or a market issue using the same measures. In such cases, alternative strategies are needed to reduce discounting and implicitly address issues of overproduction and overconsumption. The next section takes a closer look at the companies’ current strategies for cutting discounts.

Ways to Reduce End-of-season Sales

The results show that there are three main ways of addressing the problem of end-of-season sales: (1) optimising, (2) stimulating the market, and (3) finding alternative solutions to conventional business practices. These three strategies, used to reduce end-of-season sales, are outlined below.

Optimising

The first strategy for addressing the issue of sales and discounts is optimising the supply chain. Most respondents reported on several initiatives for improved prognoses between supply and demand, for example, increasing the flexibility of the supply chain by means of local production, refilling orders in season, and measuring sales in real-time using various indicators. The last initiative was exemplified during several interviews: “We do informal follow-ups every week” (Commercial Manager, Company C) and “We work incredibly hard on follow-ups” (Controller, Company G). For example, the controller at Company G reported on having implemented a Radio Frequency Identification (RFID) system, which gave them improved tracking of the sales of each product category and thus a better match between supply and demand: “Using the RFID technology, we can optimise where we’ve allocated the products and get a completely different kind of stock control”. Hence, technology was used to assist them in optimising distribution of the products to the various stores. Another initiative reported on by a business strategist at Company C was merging the online warehouse with the warehouse supporting the physical stores. This way, the company had more flexibility in serving different markets and meeting different demands.

Stimulating the Market

An alternative way of dealing with excess volumes was taking measures to prevent a large end-of-season sale by stimulating the market during the season using campaigns and special offers. Several companies mentioned “activating” (Company C), “selling at a certain pace” (Company G), and similar expressions to describe how they wanted to activate certain products, product groups, customers, or customer groups. On the shop floor too, this was a concept that was talked about: “By the turnover rates, we can see which products have an insufficient sales pace” (Shop Assistant, informal talk). One of the respondents explained how in-season sales were linked to end-of-season sales:

It’s better to sell using lower price reductions in-season than using larger price reductions at the end of the season […] This way, the consumer is better off too, getting the products while they’re still in-season (Business Strategist, Company C).

Price reductions, then, are used to steer sales and customers in certain directions, for example, for products not achieving company sales targets. By doing continuous follow-ups, companies pinpoint products that have difficulties reaching their markets. The benefit of discounting products in-season, as reported by the respondent above, is that it can be done at a lower rate than during the end-of-season sale, and still be considered an attractive offer to the customer. A 20 per cent discount on knitted sweaters could, for example, spur sales in that product group while the need still exists for this type of product, rather than selling it later when it is already considered out of date and fashion. The business strategist at Company E reported on the risks of such reductions: “We don’t want to have offers on our unsuccessful products as it risks the brand gaining a bad reputation.” Hence, although it might be an efficient way of stimulating the market, another company avoided this strategy as it considered the risks associated with price reductions to be larger than the benefits.

Finding Alternative Solutions for Unsold Products

The companies also reported on alternative solutions to discounting, such as addressing the problem before it even arose. For example, Company A worked to reduce the number of pieces in a seasonal collection, as fewer designs meant fewer clothes to waste. Other companies worked to reduce the share of seasonal fashion clothes in favour of a higher share of carry-over products, that could be sold during several seasons. In addition, other solutions were used to complement an existing discounting strategy, for products which, despite price reductions, had not sold. However, products that were difficult to sell at full price could also be difficult to sell at a discounted price:

If products sell poorly, they’ll probably end up on sale. We probably choose things that didn’t work at all, as customers showed a lack of interest in these products (Business Strategist, Company E).

The business strategist of Company C came up with a different interpretation, i.e. that some products can be saved for the next end-of-season sale, when they can contribute towards making that sale more attractive due to more products being displayed. Figure 13.2 shows some of the alternative solutions for unsold products. The alternative solutions applied to unsold products, either before ending up in the sale or after, are mentioned below.

Fig. 13.2
A tree diagram shows the alternative solutions for unsold products based on carry-overs. Outlet, charity, re-design, and re-branding.

Alternatives applied to unsold products

Full size image

Among the unsold products, various solutions are available for handling this stock. Some companies reported having “carry-overs” in their collections from one season to the next (Companies A, C and G). Such products were not discounted, at least not at this stage, instead becoming part of next year’s collection. The sustainability manager at Company G reported that, “About 30 per cent of the assortment is so-called carry-overs, which are never discounted”. These are generally less fashion-sensitive items, consisting of basics (e.g. t-shirts, jeans etc.), bestsellers (specific products the company is renowned for), or products considered as still being in fashion for at least one more season. Another word mentioned by the business strategist at Company E was “longevity”, indicating that a garment can last for a long time. In a similar way, the sustainability manager at Company A said, “We need to step out of the vicious circle, where we have a lot of products in each collection—reducing the number of styles and increasing the share of those that can live for longer”. This work had already started at the company.

Another phenomenon mentioned by several respondents was how some companies had started outlets, whereby unsold clothes from conventional stores were gathered and sold at discounted prices in specific locations (i.e. during interviews with Companies A, E and F, IT Companies I and III). However, this entailed challenges: “This is problematic since leftover products are often in very small or very large sizes. […] this makes it difficult to sell those products” (Sustainability Manager, Company A). Hence, outlets were often the last resort for products that sold neither in-season nor during the end-of-season sales. Starting up outlets was a strategic way of keeping a brand intact, whilst still finding a channel for products. Another option was to use a wholesaler, who assisted in finding alternative markets for the products, in which the company had no prior presence. Company C has, for example, been in contact with wholesalers in Latin America, while Company A has tried (but then stopped) working with a national wholesaler, operating as an outlet for various brands, in a market where they already had a presence.

A third option that was reported on was giving clothes to charity. The sustainability manager at Company G reported on a procedure whereby leftover stock from stores was sent back to the warehouse and later given to a charity organisation: “They have a sorting facility where they decide whether to sell the clothes in one of their stores, give it to disaster areas or recycle the material”. Giving to charity, however, was sometimes problematic: “There’s no shortage of garments in the world so giving to charity comes with a risk of dumping” (Sustainability Manager, Company F). Consequently, this company avoided giving unsold products to charity. However, what they did do was give reclaimed items and used staff clothes either to a local charity shop or to a women’s shelter. The operations manager at Company D raised another issue when giving clothes to charity: “We don’t want to give one hundred dresses of the same style away, that just wouldn’t look good for us”. This company generally did not give to charity, but when they did, they cut the labels off—to avoid harming the brand while ensuring that the clothes could still be used.

A fourth option was the use of re-design, which sometimes even resulted in adding value to the product. The sustainability manager at Company A reported on sending leftover products to the warehouse which could later be used for recycling projects. One example mentioned was weaving carpets from leftover products (Wholesale and Retail Manager, Company A). This was less common as it required additional work and resources. Company A has also collaborated with a local textile factory in the past, but mainly for repairs. Company G also reported on collaborations regarding recycling projects with a local designer, but then for second-hand garments and not leftover stock. One of the entrepreneurs interviewed for the project reported on collaborations with large partners, for example, museums, fairs, and private companies. Using advertising material and leftover fabrics, products have been re-designed, for example, into bags or pillows. The problem, as the Sustainability Manager at Company A, describes it, is that it takes time engaging in this type of project. Hence, re-designing, re-making and recycling can be alternatives to discounting, but they also mean putting more time and value into the product, which might also be reflected in the final price.

Lastly, another solution observed in physical stores and reported on in the interviews is a type of re-branding of unsold products, to create hype. The CEO at IT Company I explained: “You need to make it attractive again, for example by labelling it as a ‘unique item’”. Company D called such products “revisited”, while observations in stores showed racks of “last chance” items. Hence, by framing these products as something unique, prices could sometimes be kept the same, and sometimes even increased, as these items could then be considered exclusive offers.

Conclusion

In sum, discounting is done at different times throughout the season for several different reasons whereby companies, in various ways, try to reduce the number of discounts. Improving prognoses might work to a certain extent, and the companies reported on are progressing in terms of reducing their excess volumes using technological developments. However, such a solution is less satisfactory in cases where, for example, design or space is the problem. Also, there has traditionally been a notion of gaining economic benefit from buying in large volumes and paying less per item, leading to a tendency for the company to overconsume. The logic behind this is the risk of selling out and needing to refill by producing at higher cost, making it difficult to eliminate all kinds of discounts. However, this attitude is changing, as some retailers are noticing benefits in reducing discounting whilst retaining their profitability due to improved margins. Moreover, while market stimulation in-season might be an efficient way of getting rid of excessive volumes and reducing end-of-season sales, it does not address sustainability issues, for example, overproduction and overconsumption: Rather it contributes towards an unsustainable way of doing business, something which an increasing number of companies are now realising.

Future Avenues for Retail and Consumption

This chapter has pointed to the importance of treating overproduction and overconsumption not as two separate phenomena, but as two concepts closely intertwined with each other. Moreover, it has demonstrated that discounting can be conceptualised as the missing link. To address overproduction and avoid unsold products becoming waste, discounting has been used as a solution by many companies. However, in doing so, discounting has contributed to maintaining a practice of overconsumption within firms, as well as stimulating the market and overconsumption by end-consumers.

Since an optimal point between supply and demand seems difficult to achieve—if not impossible—we can expect there to be a certain amount of overproduction in the future too. However, in order for that overproduction not to lead to overconsumption as well—both within and outside the firm—we must learn to differentiate between leftover products, waste, and discounting. Leftover products do not need to become waste, nor discounted per se, but they can be dealt with in other ways. Only by engaging in strategies that act as an alternative to discounting will companies be able to address the issues of overproduction and overconsumption. Only then will more sustainable businesses be able to take shape and flourish.

The study has pointed to potential avenues for future business and research by providing examples of solutions that act as an alternative to discounting, for example, carry-overs, reducing numbers of items and seasonal collections, and, lastly, re-designing and re-making. Such solutions, to some extent and in some settings, have previously been incentivised by a reduced VAT rate on repairs and second-hand purchases, but they could be supported even more on the national and international levels. In general, stricter laws and more monitoring of compliance with existing laws would be beneficial, not only in reducing discounts but also in ensuring equal competition. One example here is a new European law recently enacted, combatting how some retailers have made use of price increases prior to discounts to give the impression of offering larger price reductions.

Another trend noticed in the industry, and outside the scope of this study, is retailers moving towards personalisation and made-to-order products. In short, that would mean no supply until a demand arises, thus reducing overproduction. Several companies are engaging in this type of business model already, and it is especially common among start-ups. Whether this will lead to less, or more, consumption is still to be investigated, as it can be accompanied by the risk of creating new consumer demand rather than meeting existing demand.

This idea, that demand is not static but dynamic, is important to keep in mind in other studies, too, on the link between overconsumption and overproduction. Prognoses take their starting point in the concept of meeting market demand: However, if market demand is changing, how can it then be met? Hence, when supply aims to match demand, there are no limits to how much supply there can be. To build more sustainable businesses, we need to reverse these arguments and instead take supply as our starting point. How can we sustain responsible businesses in the future, within planetary boundaries and the limits of the world’s resources? If we find an answer to that question, then we will be much more likely to find more sustainable solutions for the future.