COVID-19 vs Fashion 2020

One of the market segments that has been affected by a pandemic is the fashion industry. Fashion generated $2.5 trillion in global revenue every year. It would seem that the chances of survival for clothing vendors should be good. Their product is not perishable, profit margins are quite high, so after the quarantine measures are cancelled, retailers can safely open the stores and wait for the customers with their delayed demand while sitting at home.

In fact, that is very much not the case. Mystery shopping provider and CX agency Scheduling has studied expert opinion and key figures of the fashion world and is ready to share the information obtained. 

The impact of the pandemic on fashion results in unemployment or financial difficulties for everyone involved: from those who collect the fibers used in textile production to sales consultants who sell ready fashion products.

Clothing is a seasonal product. There is a high chance to sell a fashionable item at a high price only on the eve or at the beginning of the season, then it quickly loses in price. This is the first specific trouble the clothing stores have faced because of COVID-19. When they had to close in the middle of March due to the quarantine, there was still spring assortment in shop windows. When boutiques and stores of up to 800 square meters re-opened at the end of April, and large retail outlets re-opened in early May, it was the right time to offer summer outfits. As a result, there are now 200 to 300 million units of unsold goods in warehouses.

The impact of COVID-19

Coronavirus has caused billion-dollars losses in the sphere

• Suspension of factories and the mass cancellation of fashion shows.
• Mass layoffs of employees at H&M, Gloria Jeans, Topshop, and other fashion retailers.
• Expenditures on clothing, footwear, and accessories decreased by 76.6% between April 20 and 26.
• Luxury brands lose on average 30% of their profits.

But online retailers are growing

• The demand for courier delivery has tripled over the last month.
• Online sales have increased by 25%. For the brand, the current crisis has become a matter of internal cost optimization, rather than demand.
• Branded masks have grown in demand.
• The demand for smart homewear has increased by 415% among men and 720% among women.
• There were 240% more house slippers bought.
• Fashion is forced to adapt to digital (virtual fashion week, virtual fashion designer).

Reduced quarantine

Requirements for the stores after quitting the quarantine

• Conducting mandatory temperature screening of all store employees before the shift starts.
• Organize a hand treatment point with antiseptics. 
• No more than 1 buyer or customer per 10 square meters.
• Customers can only go shopping wearing a mask or respirator.

Because of the pandemic and recession, there’s no desire to go shopping

• In the second week after the partial easing of the lockdown, revenues were on average 44% lower than in the same period last year.
• In two weeks after the partial opening of stores, 54% of respondents never took advantage of the opportunity to buy clothes again.
• Another 25% left home for shopping only once in half a month.

Forecast from McKinsey

Experts estimate that revenues of the global fashion industry (clothing and footwear sector) will decrease by 27-30% in 2020 compared to the previous year. Although, in 2021 the industry can recover positive growth by 2-4 %.

For the individual luxury goods industry (luxury fashion, luxury accessories, luxury watches, fine jewelry, and luxury beauty), global revenues will decline by 35-39% in 2020 compared to the previous year. And in 2021, it will grow by 1-4%.

Combined with McKinsey, Global Fashion Index Analysis (MGFI) which showed that 56% of global fashion companies did not earn their cost of capital in 2018. A large number of global fashion companies are expected to go bankrupt in the next 12-18 months.

Recommendations for the industry 

1. The exit will be long and gradual. The Business of Fashion and McKinsey believe that the main mechanism for coping with the crisis will be a collaboration of brands. To cope with the consequences of the epidemic, even competing organizations of the sphere should share their data and create the strategies together. In order to get to know the competitors better and make sure they are worth working with, it is necessary to conduct competitive analysis. It can be carried out on their own, or with the help of a competitive intelligence agency.
2. There will be a reboot in the market and the industry in general! The fashion business will work in a new way! People will continue to dress up, but the client will change! Therefore, it is necessary to rethink the entire system of approach to service to get the best customer experience from fashion brands.
3. After the quarantine, customers will change their priorities, and they will think twice whether they need another pair of shoes or not. The solution will be to buy basic items that are always in demand. Shirts, pants, socks, underwear, and shoes will be purchased! A customer will become more picky and ready to buy only unique models. In order to find out his preferences and always stay up to date, you should conduct retail audits on a regular basis. 
4. Personal approach and discounts will be your salvation! This is how you need to start a new summer season. If you want to survive and plan to create a new collection, you need to enter the market with a competitive edge. For that, you will need a well-known tool — competitor price monitoring. You will get to know your competitors’ pricing and define the main criteria for yourself. Discounts on a new collection can always catch the buyer’s attention, and an individual approach and good service will help form customer loyalty and make him your regular customer.
5. Move to online! If a couple of months ago the brands doubted their development online, now even the most conservative manufacturers are thinking about their own page on social networks and channels on YouTube. Don’t be afraid, you can start promoting your brand right now for free or seek specialists help to sort everything out for you.