Product Disassembling, De-Branding + Recycling
In 2025, one of the most significant luxury brand trends we saw was the large-scale adoption of product recycling and de-branding programs.
This emerging trend is a relatively new solution to a very old problem: the tension between inventory management and maintaining brand prestige.
You may have noticed that your favorite luxury brands rarely go on sale. Outside the luxury sector, brands typically sell inventory first at full price, then through increasingly larger discounts, and finally through “jobbers” or other liquidation channels, who purchase unsold inventory in bulk. Within the luxury sector, these practices diminish brand prestige by making products more accessible and less aspirational.
Luxury brands have long struggled with what to do with backstock and dated inventory. Until recently, many brands destroyed this excess inventory—a practice that increasingly drew public outrage and mounting bad press. This negative attention has led to laws in many jurisdictions—including the European Union and California—that have begun to regulate and prohibit the practice.
As a result of these regulations, brands have started engaging vendors to de-brand, disassemble, and recycle excess inventory. Agreements with these vendors have unique areas of concern. Here’s what to look out for:
🚩 The Grey Market:
One of the biggest risks of engaging these vendors is the opportunity for product diversion into the Grey Market. The “Grey Market” refers to the sale of authentic products through unauthorized retailers. Because the inventory provided to de-branding/recycling vendors is not marked for future sale, luxury brands must take significant steps to ensure that their vendors—and their vendors’ staff—are not diverting products for Grey Market sales. Vendor agreements should outline strict security measures and require periodic, systematic inventory counts to ensure that products are actually disassembled and not slipping out the back door.
🚩 Insurance:
Insurance provisions are a common sticking point in negotiations for these vendor agreements. Luxury brands and their insurers value the risk of loss somewhere between the full sale price and a discounted resale price. Vendors and their insurers, on the other hand, value the risk of loss somewhere between the value of deadstock and uninsurable, since the materials are destined for recycling. There are several solutions to this quandary, but one creative approach is to shift the insurance coverage focus from the inventory itself to commercial general liability insurance with contractual liability coverage. This way, theft of product and failure to secure the product become indemnifiable contractual obligations that, if breached, are subject to coverage by the contractual liability insurance. Ideally, you should also provide for a mutually agreed-upon product value in the event of theft or failure to adequately secure the product.
🚩 Liquidated Damages:
While it is somewhat easier to agree on the value of stolen product, it is much more difficult to ascertain the reputational damage associated with an influx of product into the Grey Market. We recommend addressing reputational damage with a liquidated damages clause. This provides a pre-agreed value for reputational loss associated with theft. Especially if a brand is litigation-averse, and considering the cost of estimating this loss for evidence in court, a reasonable liquidated damages provision is an excellent commercial option.
🚩 Design Plan:
Although not strictly legal, this type of business collaboration is most successful when a brand pre-plans how certain materials can be reintegrated into the design and manufacturing process. At the luxury price point, where brands often have more control over manufacturing, this can be somewhat easier than at more accessible price points, where manufacturing is more decentralized.