Explainer
Where unsold apparel actually goes
A garment that does not sell at full price does not simply disappear from a balance sheet. It moves down a chain of buyers, each paying less than the last, and the speed at which a retailer pushes goods down that chain is one of the clearest signals of how much trouble a season was.
By The Retail Ledger · September 27, 2026
Why the chain matters to a balance sheet
Inventory is carried at cost, and it stops being an asset the moment it becomes clear that it cannot be sold at a price that covers it. Two retailers can report the same inventory reduction in the same quarter and have done completely different things: one sold through at a modest markdown, the other moved bulk lots into the off-price channel at a fraction of cost. The income statement shows the difference, the balance sheet does not.
That is why a fall in an inventory line, on its own, says very little. The margin line for the same period is what shows the price paid for the reduction.
Who buys at each step
Off-price chains are the largest single destination. TJX, which runs TJ Maxx, Marshalls and HomeGoods among other banners, operates more than four thousand stores; Ross runs roughly seventeen hundred. They buy in volume, take mixed assortments, and hold some of what they buy as packaway for a later season.
Closeout distributors sit between the brand and the off-price floor. They take whole lots, including the parts an off-price buyer will not take, sort them by size and style, and resell the marketable portion. Their margin is in the sorting, which is why the size composition of a lot is the number they care about most. That is the business at the center of Gap Inc. v. SVES GO.
Liquidators and bin stores are the last commercial stop. Pricing there is not by item: pallets sell by lot at auction, and bin stores commonly price by day of the week, starting high on restock day and falling until the bin is empty.
Questions
What is packaway inventory?
Packaway is merchandise bought in one season and warehoused for sale in a later one. Off-price retailers use it to buy opportunistically when a brand needs to move goods quickly, then release the stock when the season comes round again.
What discount do off-price retailers work at?
Off-price chains typically advertise 20 to 60 percent below department store prices, and deeper markdowns on older stock. The buy price from the brand is a fraction of wholesale, which is what makes the model work.
What is the difference between off-price and outlet?
An outlet store is operated by the brand and sells that brand, often including product made specifically for outlet. An off-price retailer is independent and sells whatever it can buy, across thousands of brands.
Why do brands sell to off-price at all?
Because the alternative is worse. Holding unsold seasonal goods consumes warehouse space and working capital, and its value falls every month. Selling into off-price converts it to cash at a known price.
Related: how a lot is priced and the 2022 glut timeline.