In the situation below, which option do you think is the best one to choose?
The factory you work with has produced 20,000 T-shirts with your designer label sewn in them. The buyer decides to cancel the order within the time frame in which there can be no penalty for the cancellation. You have informed the buyer of the liability that you have with the factory since, the buyer’s decision has left you with 20,000 T-shirts for which you don’t have any buyer.
You have the below-mentioned options available to resolve this situation. Which option do you think is the best option and why? Discuss why you did not pick the other options and why they would not work.
- Pay the liability and then destroy the goods.
- Give the factory permission to sell off the goods for you.
- Give the factory permission to take your brand off the goods by removing the label, and then they should sell the goods to someone else.
- Pay the factory what is owed, and then try to sell the goods to an off-price buyer to get them out of your inventory.
Of the options given, the third is the best one assuming that the factory is willing to do this at little or no cost to you.
The first option is bad because you are out a lot of money and have nothing to show for it. You have simply thrown away your money.
The second and the fourth options are not very good because they can dilute your brand equity. If you have a "designer label" then presumably you have an interest in maintaining the reputation of the clothes you produce. If they are sold in off-price retail outlets, your brand may come to be associated with cheap, low-quality goods.
If, on the other hand, you can get the factory to remove your label from the goods, you have no further worries about losing brand equity. As long as the factory does not force you to pay a large amount for their trouble, you are able to keep your reputation without losing too much money.