The coronavirus (Covid-19) pandemic will provide the global fashion industry with an opportunity to “reset and reshape”, a new report says, with digital acceleration, discounting, consolidation and innovation all expected to feature.
Once the dust settles on the immediate coronavirus crisis, the global fashion industry will face a recessionary market and an industry landscape still undergoing dramatic transformation, according to an update to ‘The State of Fashion 2020’ report by Business of Fashion (BoF) and McKinsey.
A changing consumer mindset
“We expect a period of recovery to be characterised by a continued lull in spending and a decrease in demand across channels,” report authors note. “As noted in our previous reports, the consumer mindset was already showing signs of shifting in certain directions before the pandemic.”
Now, the report suggests the resulting “quarantine of consumption” could accelerate some of these consumer shifts, such as a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action.
Meanwhile, some of the shifts, such as the digital step change, in-season retail, seasonless design and a decline in wholesale are mostly an acceleration of the inevitable – “things that would have happened further down the road if the pandemic had not helped them gain speed and urgency now,” the report explains.
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By GlobalData“The coronavirus presents fashion with a chance to reset and completely reshape the industry’s value chain – not to mention an opportunity to reassess the values by which we measure our actions. We expect that themes of digital acceleration, discounting, industry consolidation and corporate innovation will be prioritised once the immediate crisis subsides,” the authors say.
“Even after witnessing waves of insolvencies, industry leaders will need to get comfortable with uncertainty and ramp-up their future-proofing efforts as the potential for further outbreaks and lockdowns loom. This will also be a time for collaboration within the industry – even between competing organisations. No company will get through the pandemic alone, and fashion players need to share data, strategies and insights on how to navigate the storm.
“Brands, suppliers, contractors and landlords should also find ways to share the burden.”
Changing themes
According to the report, there has been a 700% increase in the number of Chinese brands live-streaming on Chinese e-commerce website Taobao since the outbreak of Covid-19. While 56% of consumers said special promotions were an important factor when shopping for clothes in the four weeks leading up to 29 March 2020.
Further, around 30% of fashion industry employees perceive their company’s planning for recovery post crisis response as ineffective, while 80% of fashion companies are likely to be in distress after more than two months of store closures.
The report has highlighted five themes occurring as result of the crisis:
Survival instincts: Recovery from the pandemic will coincide with a recessionary market, compelling fashion players to ramp up resilience planning and adapt their operating models. Companies surviving the immediate crisis will have made bold and rapid interventions to stabilise their core business before seeking out new markets, strategic opportunities and future pockets of growth in a global fashion industry undergoing dramatic transformation.
Discount mindset: As deep discounting plagues retailers for the remainder of 2020, a decade-long build-up of bargain shopping culture will be exacerbated by a rise in anti-consumerism, a glut in inventory and cash-strapped consumers looking to trade down or turn to off-price channels. To reach increasingly frugal and disillusioned consumers, brands must find inventive ways to regain value and rethink their broader business mission.
Digital escalation: Social distancing has highlighted the importance of digital channels more than ever and lockdowns have elevated digital as an urgent priority across the entire value chain but, unless companies scale up and strengthen their digital capabilities in the recovery phase of the crisis, they will suffer in the longer term. Consumers will continue to demand more in this space and brands must act fast to deliver.
Darwinian shakeout: The crisis will shake out the weak, embolden the strong and accelerate the decline of companies that were already struggling before the pandemic, leading to massive waves of consolidation, M&A activity and insolvencies. To secure their future, companies must adapt to the new market environment by evaluating divestment and acquisition opportunities to strengthen their core and capture white spaces that emerge from the reshuffle.
Innovation imperative: To cope with new restrictions, mitigate the damaging impact of the pandemic and adapt to economic and consumer shifts, companies must introduce new tools and strategies across the value chain to future-proof their business models. Fashion players must harness these innovations and scale up those that work in order to make radical and enduring changes to their organisations – and to the wider industry – after the dust settles.
Looking to China
All eyes will now be on China for a glimpse into the future, given it was the first country to be hit by Covid-19 and the first to return to work after months of shutdown.
“The hope is that Chinese businesses – which were impacted earlier than the rest of the world – will serve as a crystal ball for executives elsewhere looking to intervene with strategies adapted or borrowed from China,” report authors say.
Aside from that, China’s colossal consumer market and the critical role the country plays in supply chains means its own recovery will be a determining factor in the recovery of the global fashion industry.
According to the report, a global decline in orders from major clothing brands will see even more factories competing for China’s domestic business and many converting to a “consumer-to-manufacturer” (C2M) model. Alibaba-owned Taobao recently unveiled its plans to work with 1,000 manufacturers across China on its custom-manufacturing platform, aiming to turn them into “super factories” with annual output exceeding US$14m each.
“As the first country to suffer from the coronavirus outbreak, China’s customer-first, innovation-centred recovery mentality may prove to be a model for some global fashion industry leaders to emulate during these tough times — but only up to a point. As the economic fallout unfolds, the Chinese market will continue to dance to its own rhythm and, while some of the beats will sound familiar or indeed universal, others won’t be popular beyond its borders.”
The report concludes: “Navigating this uncertainty will not be easy for fashion leaders. Players need to be decisive and start putting recovery strategies into motion to emerge with renewed energy. The crisis is a catalyst that will shock the industry into change – now is the time to get ready for a post-coronavirus world.”
