Excess Apparel Inventory Becomes Strategic Asset As EPR Pressure Mounts

Post-holiday inventory backlogs are again testing apparel supply chains, as weaker-than-expected Q4 retail performance leaves brands holding surplus fabric, packaging, and finished goods. With discount channels saturated and landfill increasingly scrutinized, excess inventory is no longer just a balance sheet problem. It is becoming a regulatory and reputational liability.

At the same time, extended producer responsibility frameworks advancing in the EU and several US states are reshaping how brands must account for materials after primary sale. What was once handled quietly through liquidation channels now carries traceability, reporting, and cost implications.

In response to a query from The Supply Chainer, Stephanie Joy Benedetto, founder of Aloqia, said many brands are reassessing how they treat surplus stock.

“If the holidays taught us anything this year, it’s that the industry’s long-standing reflex — push harder on discounting and offloading through opaque channels — simply doesn’t hold up anymore. Not economically, and certainly not sustainably,” Benedetto said.

From Write-Off To Recovery

Rather than viewing excess as stranded capital, Benedetto argues that structured secondary markets can unlock recovery more quickly than traditional liquidation paths.

“In one global apparel case, a brand facing a backlog of unused materials across multiple regions achieved over 60% in recovered value across verified secondary markets with 83% faster execution of decisions,” she said.

Instead of broad markdowns that risk brand dilution, she described a process focused on identifying reuse pathways for both raw materials and finished goods, matching supply with designers, recyclers, and circular design labs, and tracking outcomes digitally.

“In practice, this means weeks instead of months to find meaningful homes for surplus, and a clear ROI story: faster cash recovery, lower storage and disposal costs, and measurable reductions in excess inventory, waste, and emissions,” Benedetto said.

The shift reflects broader pressure on apparel brands to maintain pricing integrity while addressing growing scrutiny over textile waste. Controlled B2B resale and structured reuse markets are increasingly positioned as alternatives to uncontrolled discounting.

Stephanie Joy Benedetto, founder of Aloqia

Traceability Meets Legacy Systems

Yet as brands attempt to embed traceability into sourcing and resale decisions, integration challenges remain. “What I hear from brands every day is there’s a tug-of-war between wanting to do the right thing and being set up to actually do it,” Benedetto said.

She pointed to fragmented data across mills, certificates, shipping manifests, and sourcing systems as a persistent barrier. “Connecting that information into a coherent digital thread is like trying to weave a tapestry from threads stored in 12 separate closets.”

Legacy ERP and PLM systems were not designed to manage lifecycle or circularity data, she noted, which forces companies to layer traceability tools onto existing infrastructure rather than replace it outright. Some brands are starting small, digitizing excess flows in one region or product category before scaling.

“The magic happens when traceability is embedded as a front-line activity, not a compliance checkbox,” Benedetto said.

Regulation Changes The Economics

The regulatory backdrop is accelerating these changes. As EPR frameworks mature, brands are expected to assume greater responsibility for end-of-life outcomes.

“In the past, a lot of excess inventory and waste management has been an afterthought,” Benedetto said. “But with EPR frameworks maturing, especially in the EU and increasingly in US states, the calculus changes. Producers will be accountable not just for selling a product, but for what happens after it leaves the store or the doorstep.”

She anticipates three major shifts by 2026: excess inventory becoming a direct line-item cost, mandatory transparency around material fate, and more structured secondary markets shaped by compliance incentives. “Buying cheap materials that are hard to recycle will no longer be a hidden subsidy — it’ll hit the P&L,” she said.

For apparel operators already grappling with margin compression and volatile demand, this adds a new dimension to inventory strategy. Decisions made during sourcing and production planning now carry downstream financial consequences tied to disposal, recycling targets, and reporting obligations.

Designing For Reintegration

The combined effect of market pressure and regulation is redefining how textile supply chains measure performance. Recovery rates, resale velocity, and traceable reuse pathways are emerging alongside traditional sell-through metrics.

“This shift isn’t just regulatory, it’s cultural,” Benedetto said. “It sends a clear message that sustainability isn’t a marketing line, it’s a responsibility embedded in the product lifecycle.”

As brands prepare for tightening compliance frameworks, excess inventory management may evolve from reactive liquidation to structured reintegration. The companies that build auditable secondary pathways today could be better positioned to absorb the regulatory and economic realities of textile waste tomorrow.