Let us follow the shoe manufacturer of your city. He has no way of knowing, as I have already pointed out, who will or will not be able to buy his shoes. He makes a rough guess, he ‘estimates’, and he decides to manufacture, let us say, 50,000 pairs. Then he puts his product on the market. That is, the wholesaler, the jobber, and the storekeeper put them up for sale.
Suppose only 30,000 pairs were sold; 20,000 pairs remain on hand. Our manufacturer, unable to sell the balance in his own city, will try to dispose of it, in some other part of the country. But the shoe manufacturers there have also had the same experience. They also can’t sell all they have produced. The supply of shoes is greater than the demand for them, they tell you. They have to cut down production. That means the discharge of some of their employees, thus increasing the army of the unemployed.
‘Over-production’ this is called. But in truth it is not over-production at all. It is under-consumption, because there are many people who need new shoes, but they can’t afford to buy them.
The result? The warehouses are stocked with the shoes the people want but cannot buy, shops and factories close because of the ‘oversupply’. The same things happen in other industries. You are told that there is a ‘crisis’ and your wages must be reduced.
Your wages are cut; you are put on part time or you lose your work altogether. Thousands of men and women are thrown out of employment in that manner. Their wages stop and they cannot buy the food and other things they need. Are those things not to be had? No, on the contrary; the warehouses and stores are filled with them, there is too much of them there’s ‘over-production’.
So the capitalist system of production for profit results in this crazy situation:
people have to starve — not because there is not enough food but because there is too much of it; they have to do without the things they need, because there is too much of those things on hand;
because there is too much, manufacture is cut down, throwing thousands out of work;
being out of work and therefore not earning, those thousands lose their buying capacity. The grocer, the butcher, the tailor all suffer, as a result. That means increased unemployment all around, the crisis gets worse.
If a manufacturer sells out the entire production, it means that they’ve missed potential sales. They could have produced and sold more, so that’s what they’re going to do for next season.
When a company has over production, they won’t just drop the price to hand off the products. To some degree they do, in outlets and other off season sales that don’t interfere with the main sale.
But even then, there’s a lower limit to how cheap they can sell it off without damaging their perceived price point. Wholesale buyers are not going to buy from a brand that can’t keep a high enough price for the retailers to earn money on the markup.
The price must be artificially kept up by not making the products available too cheap on the main market.
The result is that some items just don’t ever get sold out, only because the product has lost its resale value. That’s over production.
Budgets go up, because the owners want more.
If they had owners who were satisfied with making less money consistently, they could easily adjust their production to the demand and settle for that steady income.
But they want more, so they will always attempt to sell more.
What EU is doing now is to force the manufacturers to pay for the damage of their overproduction.
The solution for the companies to avoid this is to figure out their actual sales better and/or make on-demand production. On-demand production of textile is difficult, because even fast fashion has a pipeline of about a year, and they need to know well in advance how much textile they need to make the products. A solution to that is to forget about fast fashion and make products that are sold over several seasons instead, and by using more basic textiles in their designs instead of printed patterns that only have appeal for a very limited time.
In the past, clothes were shipped to the developing world and sold in markets there. Fast fashion clothes don’t really sell in the developing world (too low quality) so there’s nothing else to do with it other than throwing it out.
They all destroy unsold because if they gave it away, everyone would wait for it to be in the unsold pile.
Source
It is over production.
If a manufacturer sells out the entire production, it means that they’ve missed potential sales. They could have produced and sold more, so that’s what they’re going to do for next season.
When a company has over production, they won’t just drop the price to hand off the products. To some degree they do, in outlets and other off season sales that don’t interfere with the main sale. But even then, there’s a lower limit to how cheap they can sell it off without damaging their perceived price point. Wholesale buyers are not going to buy from a brand that can’t keep a high enough price for the retailers to earn money on the markup. The price must be artificially kept up by not making the products available too cheap on the main market. The result is that some items just don’t ever get sold out, only because the product has lost its resale value. That’s over production.
Budgets go up, because the owners want more. If they had owners who were satisfied with making less money consistently, they could easily adjust their production to the demand and settle for that steady income. But they want more, so they will always attempt to sell more.
What EU is doing now is to force the manufacturers to pay for the damage of their overproduction. The solution for the companies to avoid this is to figure out their actual sales better and/or make on-demand production. On-demand production of textile is difficult, because even fast fashion has a pipeline of about a year, and they need to know well in advance how much textile they need to make the products. A solution to that is to forget about fast fashion and make products that are sold over several seasons instead, and by using more basic textiles in their designs instead of printed patterns that only have appeal for a very limited time.
In the past, clothes were shipped to the developing world and sold in markets there. Fast fashion clothes don’t really sell in the developing world (too low quality) so there’s nothing else to do with it other than throwing it out.
The developing countries don’t want our surplus, because it stops them from developing their own local production and markets.