Since its outbreak in China last year December 2019, COVID-19 has sent shockwaves down the global economy, one of the worst-hit -fashion retail. Retailers globally shut down their doors for a whole season as the global pandemic took over our lives.
Most fashion and luxury execs are convinced that the impact of the crisis will last for at least 12 months. A market that depends on offline sales, the impact of continued shelter-in-place orders and store closures will be tremendous.
A BCG analysis conducted in March revealed a 60-70% decline in sales from April to May in the worldwide fashion and luxury industry – with footfall in retail and recreation stores down by 44% in the U.S., 52% in Germany, 78% in India, and 59% in Brazil.16. The remainder of 2020 can expect at least a 28-38% drop in sales of fashion and luxury brands.
With June fast approaching, while things remain unclear economies across the globe are slowly opening up. The governments are relaxing the lock-down and retailers are getting ready for business. Despite this, the demand for fashion is yet to pick up as consumers remain focused on essential items.
Speculations about the future of fashion retail are rife as the struggle to survive the coming months continues. Let’s look at what the data and consumer trends suggest:
Consumer behaviour and sentiment:
Consumers around the world are constrained to their homes. At least for the coming few months groceries, medicines and staples purchase will take priority over fashion and luxury items. And while online retail has sustained the crash, it is doing marginally better than offline retail.
Despite this consumer sentiment towards fashion remains positive, though their behaviour is likely to change. Online retail will see a sharp incline as opposed to the highly marketable ‘shopping experience’ of retail stores. Brands will have to figure out ways to make online shopping a more wholesome experience.
Early signs show that demand for goods associated with well-being, and the collective goodwill will enjoy more popularity. The consumer is more likely to spend consciously, think about durability and quality given expected economic uncertainty and high levels of unemployment among consumers.
Macro trends indicate a demand significant action for sustainability fashion retail. Needless to say, brands will have implement changes in their procurement method. Inventory management will have to more conscious and sustainable given that climate change and many other environmental factors will drive changes in the fashion industry. And expectations for the entire industry will be reset around greater collaboration, more equitable partnerships, and collective responsibility across all parts of the value chain.
It is the time to see how agile a company is in reacting to new market demands. And being a sustainable manufacturer with sustainable products should still be a strategic advantage.
Fashion retailers are the ones bearing the maximum brunt of this unprecedented lockdown, without consumption, it is impossible to kickstart global supply chains.
Experts across the globe are convinced that customer preferences may change, fashion retail will have to go through a transformation, a re-invention of biblical proportions of sort. The consumer will likely avoid physical outlets for at least the next 6-7 months. Going digital is now a prerogative for every brand out their if it wants to stay put in the market.
In the 2003 SARS outbreak, the population hesitated to venture outdoors, that drove lasting changes in retail consumption patterns, most of the population shifted to online shopping. Until things normalized every brand must work on having a strong online presence and find the right ways of connecting with their customers.
Defend business and its critical assets. Protect human capital, financial capital, and supply chain relationships. Manage orders while preserving supply chain relationships. Avoid cancelling completed orders to prevent factory closures and impacts to workers. Engage in collaborative conversations and respectful dialogue with suppliers on how to address issues together.
It is important to note that retailers will have to find a liable solution to these issues as the frequency at which pandemics breakout has increased. Disruption to the supply chain can be debilitating to the business which is why retailers must not just explore online avenues but other novel ways to connect to it consumer. AI will have a significant role to play in the coming few months with companies offering state-of-the-art innovations to manage inventory, enhance product discovery, deep tagging – brands that can adapt faster will sustain this economic shock and move on to build better models.
Unfortunately, most players may not survive this period of low demand. Pressures on the supply base will lead to many closures and a decline in supplier capabilities over the coming months.
Scale will be a determining factor, smaller players without, a clear proposition, established consumer equity and a healthy balance sheet will face bankruptcy. Mature sizable companies will have to protect resources to weather this crisis.
Okkular is a Melbourne based Australian tech startup. Okkular’s vision is harnessing deep learning driven artificial intelligence to help retailers improve customer experience, reduce costs and drive sales with insightful automation and personalization. Our solutions have been developed by having conversations with multiple fashion retailers.
If you’d like to know more, log on to our website www.okkular.io