Funko, the popular toy and collectible manufacturer, has recently announced plans to destroy between $30 million and $36 million worth of inventory. This decision comes as a result of surplus stocks that have strained the company's fulfillment network and increased operating costs. The excess inventory has not only been costly to store but has also negatively impacted Funko's fulfillment operations, with the company's facility running at 100% capacity when it needs to be at 80% for optimal efficiency.
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The inventory being destroyed is in good condition, and Funko is targeting its oldest stock first. To alleviate operational constraints, the company is also discarding inventory that could potentially be sold in the future, as well as items that are currently selling well but represent more supply than needed. Funko is using a third-party facility near its distribution center in Buckeye, Arizona, to provide certificates of destruction to intellectual property licensors.
Funko's CEO, Brian Mariotti, revealed that since the pandemic, the company has added approximately $85 million in annual fulfillment expenses despite similar overall throughput in its distribution center. To address this issue, Funko is reducing inventory and implementing a new warehouse management system that executives expect will significantly reduce costs.
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Inventory destruction can come with sustainability implications and reputational risks. Several high-profile fashion brands have faced public backlash for destroying unsold products, which is often done to protect margins and brand equity. The decision to destroy products can be even more controversial as resale and other circular forms of commerce that preserve used products grow in popularity. These channels often emphasize the environmental costs of disposing of products that consumed natural resources during production.
With over 20 years in the industry and approximately 8,366 different designs of pop figures, Funko has established itself as a major player in the toy and collectible market. However, the company's current situation highlights the challenges faced by businesses in managing inventory and balancing operational efficiency with sustainability concerns.
