Even before the pandemic struck, fashion industry experts weren't looking forward to 2020. Considering the declining worldwide consumer demand and disturbed supply chains, this year didn't seem too promising in hindsight. So it wouldn't be completely wrong to say that this year for the fashion industry was doomed from the very beginning.
The conversation around the Covid-19 impact on the fashion industry might seem trivial when compared to the crashed stock markets and struggling travel industry to a few people. But we can't ignore the fact that millions of garment workers, designers, and other professionals across the world who contribute to the fashion industry are equally in distress. If you weren’t already aware of the severity of the pandemic's aftermath, here’s an example from the point of view of a fashion brand. A famous department store brand John Lewis shut its doors temporarily for the first time since it set up 155 years ago. It had even weathered through times like the two World Wars and the 2008 Financial Crisis.
PANDEMIC HITS BANGLADESH
While the entire fashion industry is suffering worldwide, a humanitarian crisis is stirring up specifically in Bangladesh. Bangladeshi suppliers are facing the cancellation of $3 billion worth of orders from Western fashion brands as a consequence of the physical stores shutting down and declining sales. What does this mean?
Usually suppliers get paid for their work by the brand weeks, and sometimes even months after the delivery. But these suppliers, unlike the fashion brands, pay for the fabrics and raw materials upfront. The suppliers had already completed their work pre-Covid, but ever since the pandemic set in, brands not only cancelled these completed orders but also have not paid the people that work in their supply chain. Hence, this impacts about 1.2 million Bangladeshi factory workers and suppliers. According to the Center for Global Workers’ Rights 4-day survey of 300+ people, “72% of the buyers refused to pay for raw materials” and “91% of buyers refused to pay for the production cost of the suppler” (as reported by Forbes). Due to this, more than 50% of the factories that were included in the survey, had to shut down most, if not all, their operations.
These order cancellations especially hit the South Asian country hard because the RMG (ready made garment) industry is the primary driver of the country’s economy. The industry contributes to 80 percent of Bangladesh’s total exports. International companies have always found it to be an attractive market because of the cheap labor that produces high volumes at minimal margins per unit. Owing to all these cancellations, factories have had to lay off several workers and while some of them might receive severance equal to a value less than their monthly pay, the others aren’t receiving any financial aid. Resorting to savings isn’t an option for them, because their previously earned menial pay has only allowed for their hand-to-mouth lifestyle. So, while the rest of the world is fighting the virus, Bangladesh is also tackling the existing issue of poverty, which is now heightened and kills more people than does Covid-19 (as stated by Mostafiz Uddin, a Bangladeshi garment manufacturer).
The Bangladeshi government is going to provide a $5.9 million package to pay the wages of the RMG workers. However, this stimulus fund is nowhere near the $471 million per month salaries in the total RMG sector. Even though the government is choosing to offer monetary aid, the real responsibility falls on the shoulders of the brands.
Thousands of miles from Bangladesh, Los Angeles is also facing a garment industry issue. Many workers who did ‘off the books’ cannot apply for unemployment benefits, let alone “paid family leave or disability insurance”. Additionally the new norm of staying 6 feet apart doesn't permit the workers to take to the streets to protest for their demands.
INDUSTRY-WIDE CONTRIBUTIONS
The Altagamma, BCG and Bernstein report predicts a £8.78 billion decline in the sales of luxury brands. Despite this prediction and the fact that the longer the physical stores remain closed, the sooner big fashion companies will continue to stay in a state of financial crunch, luxury brands have contributed in the way they know best.
Tiffany & Co. plans to allocate a total of $1 million to the Covid-19 Solidarity Respond Fund for WHO and The New York Community Trust’s NYC Covid-19 Respond and Impact Fund. Not only did LVMH donate $2.2 million to The Red Cross China, but also used its perfume and cosmetics unit to manufacture hydroalcoholic gel. Along with LVMH, Kering is also providing medical masks. While Dolce & Gabbana donated money to Humanitas University for research purposes, Moncler’s donation will be used to construct a hospital in Italy. About 100 Lactose employees have tirelessly been creating washable masks since mid-March in the company’s French factories.
Even brands that are on a much smaller scale and definitely not as equipped as the big players, are also pitching in. For instance, Three Graces donated their entire earnings from their sales until 8th April to Crisis Charity. On the other hand, Sleep Society has been donating 15% of its sales to Mind, and Paula Knorr’s donation to Sufra (food bank in London) amounts to 20% of its profits.
ADAPTATION
Fashion shows were first cancelled by Chinese designers, and then other global designers followed suit. But these cancelled shows did not hinder the functioning of the fashion ecosystem. On March 24th, Shanghai Fashion Week took place digitally. With the help of Labelhood, a talent support community, about 31 designers used social media channels and website to launch their new collections. While some labels showcased their collection on live stream, the others presented short film
In India, Tommy Hilfiger, Ritu Kumar, and Arrow, among a couple other fashion retailers will extend their Spring-Summer collection to October. Luckily since the fabrics used by the consumers only changes around October, it is convenient for these retailers to sell their summer stock up until Diwali. Since March, there has been a 70% decline in the sale of fashion brands and according to Tommy Hilfiger Apparels’ CEO “production will stabilize only by February-March next year".
As noted by Forbes, some companies are experiencing an uninterrupted cash flow thanks to the sale of masks. For instance, the revenue of The Might Company, luxury outerwear brand in LA, has not declined from the value it incurs during an average month because consumers' purchase behavior in regards to the masks is the same as their behavior towards other accessories. Fashion has always been about self- expression, and if people choose to use masks for the same, then question that stands in front of us is whether face masks are the new trendy accessory?
FUTURE
During the first 3 months of this year, the average market cap of the “apparel, fashion and luxury players” fell by 40 percent, which is significantly steeper than the fall of the entire stock market. Additionally, the online sales have also dropped - about 5 to 20 percent in Europe and 30 to 40 percent in the US. But the path to recovery still remains uncertain with no specific end date of the pandemic in sight. The first sign of recovery will be fueled by rise in positive consumer sentiment. To give you some context, the recovery post SARS took 6 months, while it took 2 whole years to recover post the 2008 Global Financial Crisis.
Currently, even though a large majority of the physical stores in China have reopened, the purchases are 50 percent below pre-crisis levels. Recovery time will vary depending on the country and the three factors that play an important role are the healthcare systems, financial resources and the timely response to the outbreak. For things to go back to normal in the fashion industry, consumer confidence is much needed - but with people still concerned about a second wave of the virus, the future seems bleak.
Among all the uncertainty, the only thing that remains stable is the need for change in the fashion industry. Li Edelkoort, a trend forecaster says “It teaches us to slow down and to change our ways” and according to the founder of Business of Fashion Imran Ahmed, “the crisis is a catalyst that will shock the industry into change”. The founder also harps on the fact that no single brand can get through this stressful time alone, and hence every brand needs to unite as an industry to overcome this challenge. Also as a result of this pandemic, we might see a shift in consumption patterns from hype products to investment pieces that promise longevity, accordion to Ahmed. Additionally, brands might explore sustainable options more, mostly because they’ll have to reuse their existing collection for the next seasons, as is predicted by Edelkoort.
If you’re interested in a more detailed version of the impact on the fashion industry, read The State Of Fashion 2020 report.
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