With one disaster after another, the fashion industry seems to be facing some of its darkest days ever. In April, revenues of the apparel and footwear sector contracted between 27 and 30 per cent year on year with luxury contracting almost 39 per cent, said McKinsey & Company. Analysts say, these estimates failed to account for three months of shuttered stores and a big shakeout of the industry is still to come.
Squeezing creativity out of fashion
Phyllis Shapiro, Founder and President, Innovative Consulting Solutions and Assistant Professor, believes, chasing cheap and measuring margins by brands over the last 10 years had already squeezed creativity out of fashion and made it uninteresting. The pandemic has made matters worse with the count for shuttered stores stretching beyond 13,000 in 2020. Shpairo believes, store closures will continue as companies are crippled by lack of cash and expects consolidation further upstream.
Walter Loeb, Consultant and former Retail Executive too expects more companies to go out of business. Already, COVID-19 has led to a long list of bankruptcies filed by companies such as: Brooks Brothers, JC Penney, J Crew, Stein Mart, Stage Stores, Debenhams, etc, Retailers are ploughing through the scum by bailing on staff, suppliers and stores. They are reviewing the current situation to determine future profitability. Lack of demand coupled with an oversupply of unsold stock has made matters untenable for them, says Loeb.
Regaining growth levels
Achim Berg, Senior Partner, McKinsey & Company points out, the light at the end of the tunnel may stretch to 2023. The industry may reach 2019 growth levels in 2023. Brands with a strong balance sheet will emerge stronger, online retail will perform better while luxury players may have a tougher time.
Though China, where a large portion of luxury purchasing happens, may recover sales, the European and North American markets will suffer, he adds. While China’s recovery may be V-shaped, Europe’s may have ‘Nike swoosh’ recovery, with the middle tier, falling apart, says Shapiro. Fashion, may be amongst the last categories to recover as consumers focus on basic requirements. In fashion, men’s wear may be the last to bounce back, views Loeb.
Evolve with changing times
Though present realities are bleak, there is hope for those that can stomach the blows. Brands with strong fundamentals will emerge stronger from the pandemic on account of close proximity with consumers, social media channels and stronger inventory management. However, these brands should reorganize their operations according to changing scenario and consumer behavior. Once their financial conditions stabilize, consumers may begin to buy fashion again, though the dynamics of their purchases may change, adds Berg.