What's going on?
Blame the pandemic, growing financial uncertainty, or a lack of cute tops this spring: retail sales are down as much as 25% week-over-week compared to a year ago, leading to billions of dollars in unsold goods. The clothing industry has been particularly hard hit, with consumer spending down as much as 46%.
With far more supply than demand, retailers have responded with sales so steep they're calling it "Black Friday in April." Massive online discounts have become frequent sights in attempts to lure customers unable to browse or try on their wares in person.
So what happens to the clothes they don't sell?
Typically, they'd end up purchased by discount retailers, but with major buyers like Marshalls, Ross and TJ Maxx closed, that reliable market to shore up losses is nonexistent.
As a result, retailers can either offer them at extremely low prices, taking a huge loss, or they can hold onto the clothing, with the hopes of selling them once people are packing into stores again.
What does this mean for me?
In the short term: lower prices. That J. Crew sweater you coveted in January or the Lego set that was out of your price range may suddenly now be more attainable than ever.
But those lower prices may be countered by lower incomes: with the unemployment rate surging from 50-year lows to as high as 16% nationally, people could be forced to opt for making rent over making a fashion statement.
What about the long term?
The sell-off may end up reducing the number of options available to bargain hunters. With established clothing brands like Macy's, JC Penney and Neiman Marcus exploring bankruptcy, the number of brands out there could likely decrease.
And don't expect as many new ones soon: a COVID-19 pummeled economy makes it harder for smaller businesses and start-up brands to survive while consumers try to cut down on needless expenses.
Will prices continue to sink lower?
Likely yes, but not for long. Liquidators, who specialize in quickly selling all of a company's assets as they go out of business, will bring closeout prices but may both disappoint in terms of selection and leave us without a chance to buy from that retailer again.
Another option for retailers is donations, which could result in tax benefits for the business rather than letting patient consumers capitalize on another round of price cuts.