Hand’s up who’s eyeing up a new wardrobe while in COVID-19 lockdown? No? Me neither. Hand’s up who’s also itching to get back on the high street, mingling with an untold number of potential coronavirus carriers, all touching and trying on the same garments? No? Me neither. At risk of being a COVID-cliché, I’m focused on food, self-care, and gin, lots and lots of gin. And I’m not alone – consumer spend priorities have shifted hugely in the last five weeks. If we thought the fashion retail sector was in trouble before, the coronavirus pandemic has put it firmly into survival mode, with a report by Business of Fashion (BoF) and consultants McKinsey stating that global fashion sales are expected to fall 30 percent in 2020.
Indeed, the problems arising from COVID-19 for fashion retail are harsh to say the least because, as Next fashion retailer CEO Simon Wolfson said recently, “No-one wants to buy clothes to sit at home in.” The enforced shuttering of stores has resulted in not only an immediate and savage fall in sales – and with more than 80 percent of transactions in the fashion industry still happening in store, according to BoF, savage is an understatement – but also an untold amount of excess inventory. Likewise, production has all but stopped (albeit now slowly restarting as Asia comes out the other side) and many new season orders have been cancelled, causing global outcry about the loss of jobs for workers in sourcing markets such as Bangladesh, Sri Lanka, India and Cambodia – yes, we’re looking at you Primark.
Over here in the UK, such is the hit to its business, fast fashion brand New Look has also backtracked on orders, telling suppliers that payment for stock sat in store or in warehouses was on hold indefinitely. While the tales of woe get worse for some; women’s fashion retailers Oasis, Warehouse and Cath Kidston have spiralled into administration, while department store Debenhams entered administration for the second time this year. And it seems like they won’t be the only casualties.
According to the BoF report, should stores remain closed for more than two months, more than 80 percent of fast fashion companies in Europe and North America could be in difficulty. It stated, “The pandemic spells more trouble for this group, which includes department store giants, high street brands and venture-backed startups. We expect a large number of global fashion companies to go bankrupt in the next 12 to 18 months.”
However, it’s not just mass that’s going to be severly affected – luxury has also been hit hard, with a 40 percent sales fall YOY predicted. Indeed, Burberry CEO Marco Gobbetti said in a statement, “Since our February update, the material negative effect of COVID-19 on luxury demand has intensified and is now impacting the industry in all regions.” Ouch. But is there a silver lining, or is this really the final straw that broke the camel’s back for fashion retail?
Undoubtedly the end is inevitably nigh for some – without footfall or sales, those struggling before the outbreak due to the likes of Brexit and hiked rates will fail to survive the storm unless they receive a golden ticket from a last-minute investor. However, those that can withstand the next rocky few months will have to think fast and change the narrative of their business strategy to one in alignment with the surge of online consumerism. While some could be given some breathing space thanks to new measures announced by the UK government as part of the Corporate Insolvency and Governance Bill, which aims to protect retailers from being put under undue pressure by landlords for debt recovery, the all-too familiar knight in shining armour could become the main lifeline – you guessed it, digital may once again save the day.
As other areas of the fashion world, such as fashion B2B, have thought on their feet, diversifying quickly to digital strategies – with the emergence of online showrooms and catwalks quickly replacing real life events – retailers are also being advised to place precedence on e-commerce. Helen Brocklebank, CEO of Walpole, said, “Our advice to our retail members is to enhance e-commerce where possible and continue talking to customers. Luxury brands are specialists in communicating their brand values and even in these uncertain times there is significant goodwill provided the tone is right.”
But as online appetite increases, retailers need to ensure a smooth experience in order to engage, and retain, the much-valued customer. Louis Vuitton Chairman and Chief Executive Officer Michael Burke, seems to agree, telling WWD.com, “The e-commerce will benefit from it. You’ll see, within two, three months, all online sites will become a lot better because everybody had to scramble and get everything online.”
It seems that, while not a fail-safe option for some that are too far gone, enhancing e-commerce could very well give some retailers a much needed get-out-of-jail-free card long term too. Because while Alan Jope, Unilever CEO, may have been talking personal care when he last week mused over consumer purchasing habits changing indefinitely post pandemic, it’s an assumption that can easily be cast over the fashion retail world too.
And if they don’t offer online? Well, Primark is a leading example. Due to its lack of online offering, the fast fashion giant has gone from making £650m in sales to nothing. Digitalize or die, seems to be the message here.