How do small retail apparel stores get rid of their unsold/excess inventory to provide space for new inventory?

Any goods unsold for two years can be claimed as a capital loss against taxes owed. After this claim, however, the goods may not be legally sold, and in most cases they must be destroyed and shipped to a landfill. Alternatively, there are a number of charities such as Feed the Children which take advantage of such goods. They offer the business a charitable tax receipt for the retail value of the goods, then pay to have the goods shipped to places like poor South American communities, where it’s distributed free of charge. The charity is usually forced to sign an agreement that they will not distribute the goods in any market where the product is available for sale. For the business, since they’ve already claimed the wholesale value against their taxes, the charitable tax receipt is all profit. And for the charity, it means they can turn each $1 they fundraise into $7 worth of goods being distributed.

Most people don’t realize that charity thrift stores such as ARC, Goodwill, Salvation Army and St Vincent de Paul sell brand new, never used merchandise they receive as tax write-offs from business people.

Most mark the clothes way way down, and the employees tend to snap them up before anyone else ever sees the goods. Big stores same thing.

Also, @SmashTheState gave a good answer for very very old merchandise.

I worked for a well-known, high end apparel chain for almost ten years. I used the example of the ugly purple shirt to illustrate our sales and accounting options.
1. If we could sell the shirt at full price that is what we would do,
2. if we could not get full prince, we would mark it down by 20% or 33% whatever it took to sell it,
3. If we couldn’t sell it in the store, we could try to return it to the manufacturer. Not an easy thing to do.
4. If we couldn’t return it we would try to divert it out to a store like Marshall’s or a competitor.
5. If we couldn’t divert it, we could sell it to a jobber like Odd Lots sales or someone similar at maybe 15 cents on the dollar
6, If we couldn’t job it out, we could sell it to an exporter who would send it to Africa or the Philippines or some other third world company at maybe a nickel on the dollar.
6. In the case of real high-end shirts, all cotton, high quality, we could sell it to a ragman who would bleach the goods, crush it and send it to someone who made 100% rag paper like Crane’s .

Sending it directly to Goodwill or someone similar simply to get a tax deduction is the least preferable option. ANY revenue is better than no revenue.