The Coronavirus pandemic continues to screech at businesses worldwide and forces them to halt their operations. Fashion industry is experiencing its worst phase ever, as top fashion and apparel markets – the USA, Europe, China, Japan, Canada, and India among many others – have been severely impacted due to COVID-19 outspread and the industry finds no way other than closing of stores, furloughing employees and cancelling orders placed to the factories. This unforeseeable financial crisis has disrupted the previous speculations and predictions for 2020, as all the pre-planned strategies have now been redundant, leaving industry’s pundits stranded for new breathing for rest of the year.
Massive indolence in buying, supplying and consuming habits is predicted
According to a latest report of McKinsey & Co. – ‘The State of Fashion 2020: Coronavirus Update‘, fashion companies – particularly those relying on longer lead times and inflexible supply chains — are uniquely vulnerable due to the category’s discretionary nature. Indeed, fashion may face a harder time than discretionary goods overall: more than 70 per cent of European and US consumers expect to cut back spending on apparel compared to a 40 to 50 per cent drop in global discretionary spending.
The USA, being the largest apparel market in the world, is facing the heat as the number of infected people in the country is close to a million, while 40,000 deaths have already been reported. With this severity in the country when people are in self-quarantine mode, the consumption shifts are already evident in the USA, as 56 per cent consumers surveyed in McKinsey & Company’s COVID-19 Consumer Pulse Survey said they are cutting back on spending, while 48 per cent agreed that economic uncertainty is preventing them from committing to purchases they would otherwise have made.
Henceforth, time to market post COVID-19 will pose a more significant challenge. The speed by which a brand/designer can bring a product from creative to consumer could have a significant impact on how quickly a company recovers from the effects of COVID-19.
The trend predicted for consumers is that they will desire products that are personalised and custom-made. They are likely to purchase fewer garments post COVID-19 and what they would buy will be of higher quality. The consumer group will adopt a socially and environmentally conscious approach to buying and will expect that their brands demonstrate a strong commitment to sustainability as well.
Substantiating the same, J. Kirby Best, Chairman, OnPoint Manufacturing, USA, commented, “Without question, all three groups – buyers, suppliers and consumers – are going to be deeply affected by COVID-19. The question on the buying and supply sides will be who can pivot quickly enough to survive the drain of cash and other resources. They will need to make a concerted effort to rethink their business model, expel hidden costs and analyse operating practices. Now is the time to look at their business as a whole and not be separated into silos, which could lead to the adoption of a new supply chain approach.”
According to the US Department of Labor, more than 20 million people have already applied for unemployment insurance amid the COVID-19 pandemic, as businesses across the country have been forced to hold their operations. This alone will create a stop-gap in supply chain of the USA. “From a buyer/supplier’s side, I think orders and supply of raw material will be affected and we could see raw material needed for medical PPE before apparel use in some regions of the world including the USA,” shared Katherine Schildmeyer, CEO and Founder of KS Apparel Design.
Apparel makers turn PPE makers. Will it impact domestic apparel consumption?
The COVID-19 crisis has shown a spotlight on domestic manufacturing, as it pushed several companies to change over their operations quickly to manufacture PPE, which is something completely different from what they have been manufacturing till date – cut and sew products. What Katherine has pointed out above is visible in the USA. The polypropylene that goes into making condoms is now being used in making different PPE and the factories have reduced consumption of polypropylene in condoms to increase manufacturing of gloves, masks, gowns, etc. “Currently many companies are slowing their own production to take on the need for PPE. This is already behind the slowdown in Asia, specifically China, endured from the January to March period. The stop gap was for 2-3 months and sourcing raw material for production was happening at the same time when labour scarcity was felt,” claimed Katherine.
Despite manufacturers showing up to take PPE manufacturing task in their factories, there are many critical shortages of PPE in the USA currently. It is a horrific situation that has put considerable strain and risk on the country’s healthcare workers. “There is no issue with the US manufacturers stepping up to the plate and keeping up with the US demand. The issue is that it will take some time – that is not available in this situation. The US has to plan in the future for burst capacity. Although it is a nightmare to think about, this will happen again and next time we have to be prepared,” opined Kirby who himself made a decision to shift 90 per cent of OPM’s capacity to making masks, and has been handling the job wonderfully.
However, the industry seems gratified to see many micro and small manufacturers in the garment business contribute to the COVID-19 battle, keeping aside political differences. The intense focus on PPE has raised awareness on the small but vibrant cut and sew industry that has been waiting to be rediscovered.
“There isn’t one business model that works for all scenarios and products, but we predict that the in-market initiatives will be more successful post COVID-19. And of course, those companies that can pivot quickly will become invaluable in the future,” pointed out Kirby.
Apparel brands like Nike and Gap among more have larger facilities in China, and according to reports, they instituted the Military Industrial Act to allow factories to retool for both regular production and PPE. Staff may have been cut, and some retail locations may be closed for months before reopening, but PPE is helping to support some of the business financials. This model may open up a new competitive wind of medical apparel by brands in the long term. “We can note that pandemic reserves by the country will need to be replenished once COVID-19 is more under control. For small makers in America, it has been helpful to growing some of their business. However, there is also a steep learning curve for testing and FDA CE,” averred Katherine.
Many of the small companies are taking on some of the work as being pro-bono, while others are getting funded by the FDA and going through certification to help the cause. “I believe this will impact the reshoring of some apparel production. It depends on new trade deals that will be a result of the pandemic and possible tax breaks provided by Governments to corporations. The outcome is going to be interesting,” concluded Katherine.