The Coronavirus epidemic has shaken the $2.4 trillion fashion industry from the ground, from shutting down stores to cancelling fashion weeks, galas and postponing runway shows. The economic impact on the industry is expected to be huge, with millions of potential layoffs. Most importantly, it is likely to bring an irreversible change in the minds and shopping habits of its clients and industry players.
China – where Coronavirus started and where more than 500 million lives were affected by movement restrictions – contributes more than 16 per cent of the world’s GDP and is the second-largest economy after the United States.
As the virus continues to spread across China, East Asia and other world regions, uncertainty and disruption increase. Movement restrictions continue to tighten and some of the supply chains that are currently temporarily disrupted decompose entirely. Factory shutdowns inevitably follow, not just in China but also in other markets.
Let’s look at how Coronavirus is redefining the fashion industry on 5 dimensions
The impacts of Covid-19 are global and pervasive and the fashion industry is not immune. Luxury is bracing for a decrease in sales of over €30 billion, Nike for a $3.5 billion drop in the fourth fiscal quarter, and Gap already lost $100 million in Asia and Europe alone – before the outbreak really hit North America, its biggest market.
A breakdown of the fashion collections, trade shows and companies impacted by the epidemic can be found here.
As Covid-19 forces stores to close, brands are cancelling or postponing orders and deferring payments to supply chain partners. The pandemic has exposed practices that shift pressure and financial responsibility from brands to suppliers, leaving them in the lurch.
On the other hand, for brands who need a range of elements – from zippers to boxes to put the clothing in – the whole supply chain can be undone due to one missing item. Globalisation positioned China at the heart of complex supply chains, as companies worldwide came to depend on supplies from their operations there. As a consequence, factory shutdowns in virus-affected provinces have resulted in shocks across a wide range of industries. Chinese manufacturers exported a whopping $118.5 billion in textiles in 2019, according to the World Trade Organization, and also topped the list as the largest manufacturer and exporter of apparel. Now, companies focus on revising their supply chains to find alternatives to China.
Small Players Can Disappear
The fashion industry is dominated by huge companies such as €200bn LVMH, but most designers are smaller businesses that supply department stores. Around the world, less established designers – who rely almost entirely on wholesale partners for revenue – face an uncertain future. Many retailers have contracts that allow them to refuse payment if orders do not arrive within a 30-day period, particularly common for young or independent designers whose collections are seen as riskier bets.
Are Consumers Coming Back?
More concerning for many in the industry is the impact the coronavirus spread is having on consumer confidence and travel — and how long that might last. Chinese shoppers accounted for roughly 40 per cent of the €281bn spent on luxury goods globally last year, according to Jefferies, most of which were bought overseas.
What About The Most Vulnerable?
This pandemic and its ramifications leave the world’s most vulnerable exposed to greater, more profound risks. That includes the millions of people who make clothes in China and Bangladesh, the world’s top two exporters of garments. Apparel manufacturing is a major economic driver and source of employment there, as well as other nations like Cambodia and Pakistan.
The apparel manufacturer workers are among fashion’s most vulnerable during a crisis, as factories operate on razor-thin margins. Supply chain workers could be out of jobs as cancelled orders might force factories to close or cut back in countries like Bangladesh.
Mask-Hygiene over Scent-Luxury
Medical supplies are disappearing from Digital Shelves as Amazon is swiftly selling out of products. They are prioritizing products such as household staples, medical supplies and other high-demand products coming into their fulfilment centres. This means that the offerings of third-party sellers like fashion brands will see heavy delivery delays.
LVMH is manufacturing and distributing large quantities of hydroalcoholic gel free of charge to meet the desperate need for hygiene products in France. To help ease the surgical mask shortage in France, LVMH also recently secured a five million euro order with a Chinese industrial supplier to deliver 40 million masks.
Some luxury brands have contributed to help with the crisis in other ways — for example, Prada donated six Intensive Care Units to Italian hospitals and Armani donated funds to Italian hospitals and other institutions.
The perception of fashion is starting to shift. Now that the holes, inequalities and the impact of the fashion industry on the environment are so much clearer, we can ask: Do we really want to go back to that design?
While focusing on the most vulnerable, we need to design a radical new approach to what fashion is and why it exists. We need to introduce conscious business models that focus on local production, transparency and empowerment to both clients and supply chain agents.
This period of self-isolation is also a time for a more personal shift in perception. Fashion is an industry built on providing people with clothes to be seen. So while such a large proportion of the world’s population are at home, working or simply reconnecting with their loved ones, the importance of fashion begins to dissipate. As we reassess what is truly important in our lives, we can reflect on the question: Do we really need as many clothes, shoes and accessories?
When people are practicing social distancing, they avoid public places such as shopping malls and spend more time on digital platforms. This could mean more adoption of e-commerce, an area where fashion has been lagging. People whose attitude has been ‘I’d rather die than buy online’ may rethink this if they feel going to crowded, germy stores truly could kill them. But e-commerce can not simply pick up the slack for brick-and-mortar chains for three reasons:
- There is a sharp economic downturn as nervous consumers digest headlines of layoffs and a swooning stock market.
- Many traditional retailers have come to rely on their stores to support digital sales, and haven’t developed sole digital strategies.
- Digital sales still rely on manufacturers and supply chains to function.
This time is eye-opening, especially for fashion brands needing to adopt technology into their core strategies. From virtual economy, shopstreaming and virtual companion, to ambient wellness and M2P (Mentor to Protege) services, check out the 10 emerging cross-industry technology trends that have been radically accelerated by the crisis.
The coronavirus pandemic is shutting down entire countries across the world, causing a significant decline in air pollution in major cities as countries implement stricter quarantines and travel restrictions.
Satellite images from NASA’s Earth Observatory show significant drops in pollution across China and Italy since the start of the outbreak, caused by travel restrictions in those countries halt air, train and road traffic.
The unintended air pollution declines from the virus outbreak are just temporary, experts say. Sarah Myhre, a climate scientist and environmental justice activist, said that the way in which the world recovers from the pandemic is vital in the fight against climate change.
Myhre said: “If the actions here continue to bail out fossil fuel companies and multinational corporations and banks, and invest in fossil fuel infrastructure, then we are digging a hole deeper into a more violent and dangerous place”. For another view on this subject, check out Coronavirus Capitalism and How To Beat It by Naomi Klein here.
But the pandemic’s unintended climate impact could offer up a glimpse into how countries and corporations are equipped to deal with the destruction caused by the slower-moving climate change crisis.
Fashion as a climate nightmare
The fashion industry emits more carbon than international flights and maritime shipping combined. It is the second-largest consumer of the world’s water supply and pollutes the oceans with microplastics. Fashion production makes up 10% of humanity’s carbon emissions, dries up water sources, and pollutes rivers and streams.
As consumers worldwide buy more clothes, the growing market for cheap items and new styles is taking a toll on the environment. On average, people bought 60% more garments in 2014 than they did in 2000. Zara puts out 24 collections per year, while H&M offers between 12 and 16. 85% of all textiles go to the dump every year. That’s enough to fill the Sydney harbour. And washing some types of clothes sends thousands of pieces of plastic into the ocean.
The environment stands to benefit from fashion brands’ slow down in activities and step-up of digital strategies to make up for coronavirus travel restrictions. In the midst of this rapidly moving global pandemic, we also have to think about another massive threat facing us – global climate change – and what we might learn now to help us prepare for tomorrow, starting NOW.
The majority of firms will be slashing budgets, cutting payrolls and closing so-called “non-essential stores”, but therein lies an opportunity: liberation and invention out of necessity. Don’t let innovation stop, because this could be the window of opportunity.
Conscious Business Models for Fashion
Use this time to reinvent how you do what you do, bring consumers new alternatives, new value, and even reinvent your own brand in the process. For department stores, it is due time to reinvent their challenging old business models. For luxury brands, this is the wake-up call to take their business models to the next level; conscious business model, by embracing e-commerce, circular design and taking their full stand for The Global Goals for Sustainable Development.
Cultural change is hard — without a big shock, that means all the old “rules” now can be broken. This is that moment. Be aware of how consumers and the world are changing, revisit your core values and – based on them – create everyday rituals (in communication, decision making, action and collaboration) to best to serve your stakeholders. Don’t just include your investors, clients and business partners. Include your employees, their families, contractors, all the communities who work and are affected by your communication, sales and productions, future generations, Earthlings and Nature. This pandemic has become a moment of mass awaking of our ability to have compassion for each other and the Earth.
very good analysis