Will Discounted Chanel Bags Flood the Market?... Luxury Industry on Alert Over New Regulations Targeting Industry Practices

Production and Inventory Strategies Must Shift Under EU Disposal Ban
Rising Inventory Burden for Luxury Brands... AI Utilization Expected to Grow

The European Union (EU) has completely banned the disposal of unsold clothing and footwear, forcing the luxury goods industry to seek new solutions for inventory management. The longstanding strategy of destroying inventory to maintain exclusivity has lost its effectiveness, and changes are anticipated in the production and inventory management methods of luxury brands.

The EU has implemented regulations banning the incineration and landfill disposal of unsold clothing and footwear. The photo is not related to the specific content of the article. Pixabay

According to the Financial Times (FT) on the 19th (local time), starting that day, the EU prohibits the incineration or landfill disposal of unsold clothing, accessories, and footwear, including items returned by customers. This regulation, approved in 2024, targets large corporations and was designed to curb overproduction and reduce textile waste.

Under the new rules, companies are required to handle inventory through environmentally friendly methods such as donation, repair, or reuse. Disposal is permitted only as an exception, such as when items pose health or safety risks, are counterfeit, or are so damaged that restoration is impossible.

Ban on "Destroy If Unsold" Practice... Will Production and Inventory Management Change for Luxury Brands?

According to the European Environment Agency (EEA), 4% to 9% of textile products sold in Europe are discarded before ever being used. Annually, this amounts to approximately 264,000 to 594,000 tons. Court documents released last week revealed that Chanel, as part of its inventory management strategy, has regularly destroyed thousands of unsold items in Hong Kong.

However, Chanel explained to the FT that "the figures mentioned in court do not reflect our current global operating practices" and stated, "Products that are difficult to sell are processed through our recycling subsidiary 'L'Atelier des Matières,' established in 2019."

There are projections that these new measures will increase the burden on the luxury industry. Brands can no longer easily control supply and maintain exclusivity by disposing of products to restrict market availability and manage brand value. The FT noted, "Brands will have to choose between holding inventory for longer periods or reducing production volumes."

Citizens waiting in front of a luxury goods store at a large department store in Seoul, anticipating its opening. The photo is not directly related to the specific content of the article. Photo by Jinhyung Kang

Will Discount Sales Expand... AI-Powered Inventory Management Draws Attention

Some experts anticipate an expansion of discount sales. According to Bain & Company and the Italian luxury industry association Altagamma, up to 40% of luxury sales in 2025 are conducted through discounted sales. As demand slows and inventory accumulates, brands are increasingly relying on outlets and discounted pricing strategies.

Luca Solca, an analyst at Bernstein, said, "With the new regulations, companies will focus more on production planning and inventory management," adding, "Since fashion brands inevitably have some inventory left at the end of each season, the ability to conduct discount sales without damaging brand value will become even more crucial." He also noted that this shift could provide new business opportunities for companies like Value Retail in the UK, which operates luxury outlets in Europe, China, and New York.

There are also forecasts that this regulation will accelerate the adoption of artificial intelligence (AI)-powered inventory management systems. Analysts predict that efforts to use AI for demand forecasting and real-time inventory control will become more widespread. Julia Uticone, a partner at Heidrick & Struggles' Milan office, stated, "In the future, a company's competitive edge will depend on how precisely it can plan its production and sales."

This content was produced with the assistance of AI translation services.