As the world reels under the effect of the coronavirus pandemic that is shutting down entire economies in its wake, it would be an understatement to say that thousands of businesses across the world have been affected. Industries ranging from tech to apparel are facing the worst slowdown in more than a decade owed to the domino effect that started with Huanan Seafood Wholesale Market in Wuhan district of China.
From precaution to paranoia, the virus has been following the biggest events in fashion by shutting down womenswear shows in all of Europe and now the USA. Having crossed over 7,00,000 infected cases confirmed in 199 countries, the fashion industry can only brace itself for the consequences yet to come.
The issue, however, runs much deeper with China being an indelible player in the production chains of most brands and most of the hubs for fashion such as Paris, Milan and the USA caving to the pressures of COVID-19.
Fashion world’s dependence on China
China has for long been embraced as a source of cheap manufacturing, being one of the largest producers of textiles and clothing trims. The world has become so dependent on China for its cost-efficiency that brands are up against the wall as the country’s shutdown created a gap in their supply chains.
As workers in China are forced to stay home amid fears of spreading the COVID-19, it has caused huge delays in the manufacturing processes. Those delays are particularly problematic in the fashion business as clothes are sold according to seasons. Companies that receive raw materials like textiles and trims late, may need to mark down products or charge manufacturers for delays.
The current situation and hold-ups have many brands considering shifting their production partly or wholly out of China. Being able to make products in several countries will prevent the crisis the companies are facing and to add to that China’s grip on the textile production has been decreasing over the past few years. Countries like Vietnam, Bangladesh and India are coming up as cheaper and more viable options for companies to invest in for their production needs.
That being said, brands are facing problems not only with their supply chains, but also losing out on sales targets as China grapples with its shutdown. Given that Chinese customers – shopping both at home and abroad – now account for 90 per cent of the luxury goods market growth according to data from Bain & Co. and for more than a third of the revenue from luxury goods purchases according to the Financial Times, luxury stocks have been plummeting. Accordingly, fashion brands and especially luxury companies have been revising their financial forecasts for the quarter or even the whole year.
Capri Holdings, owner of Michael Kors, has warned that the coronavirus outbreak in China, which has already prompted the closure of 150 of its 220 stores in the region, could result in a $ 100 million hit to its revenue. Other companies such as Nike, Urban Outfitter and Abercrombie & Fitch had to temporarily close down their stores in an attempt to curtail the spread and to manage expenses. Ralph Lauren also reported a decrease in sales estimates by US $ 55-70 million.
The biggest blow has been felt by Apple which is heavily dependent on China for its production, and hence, made the decision to shutter all retail outlets in the country. Although they recently started opening a few stores, it is safe to say their earnings for the last quarter of the year have taken a dive and are likely to face trouble in the coming year with the production chain having been disrupted for so long.
Fashion events suffer
The trade fair and fashion shows that keep the industry thriving and provide opportunities for the discovery of latest trends in both fashion and textiles have been hit hard.
Events in China like Intertextiles Shanghai Apparel Fabrics, Kingpins Hong Kong, Beijing and Shanghai Fashion shows had to be cancelled altogether. Even Magic Las Vegas saw a lukewarm response with almost 40 per cent of its exhibitors in the sourcing section failing to turn up due to travel bans in Asia. Many other countries are struggling as events are either cancelled or witnessing a sea of withdrawals as well as attendees in face masks.
The “resort” or “cruise” season which is one of the most lucrative, to showcase some of the most ambitious yet commercial collections, brings editors, influencers, and, perhaps most importantly, major clients to locations across the world. A number of brands have already cancelled their cruise shows: Gucci, which had planned to show in San Francisco in May; Burberry, which had scheduled an April show in Shanghai; and Prada, which planned a resort show in Tokyo, Japan in late May. Even if Cruise shows are less directional than the traditional “on-season” shows, they are nonetheless major brand-building moments for fashion houses—and a chance to bring their clothes to audiences outside of the four major fashion capitals. They are also a major resource for stores to revive their stock in-between seasons.
Fashion designers are cancelling and rethinking their shows, which may lead to questions about format itself long-term. “In a time of crisis, we have to think about a radical reset,” Vogue editor Anna Wintour told the Times. Ralph Lauren cancelled his April show, originally intended to display his Fall 2020 collection, and Giorgio Armani, on the final day of Milan Fashion Week, opted to livestream his show, from an empty room, to the audience. A number of smaller events, from a Michael Kors event in Milan, Chanel’s Métiers d’Art show to Rosie Assoulin’s presentation in Paris, were cancelled too. The virus might force designers to question whether they really need to do a fashion show to sell their products and build their brand at all. Many prominent personalities in fashion opted to refrain from attending the shows in both Paris and Milan.
The road ahead
The outbreak has forced people to consider radical change when it comes to their notions of retailing. A number of designers discovered this season that they could still make sales without the person-to-person appointments, using digital platforms like Joor to sell their goods instead. Undoubtedly a number of high-touch, visionary merchants will struggle to place orders for clothing that they are not able to feel, but wholesalers are already thinking about how they might solve for that over the next season. With the idea of fashion shows likely to become obsolete, both luxury and mass brands are upgrading their e-tailing efficiencies to overcome the hurdles of traditional retail exposed by the pandemic.
Contrary to popular belief, most luxury shopping does not happen online, accounting only 9 per cent of luxury goods transactions, according to a 2019 report. In the midst of government-mandated quarantines in China, consultants at Bain & Co found that shoppers dramatically increased their online purchases through Alibaba’s Tmall, a prominent Chinese ecommerce site, but that their designer goods purchases went down. In order to grasp the opportunity at hand, Shanghai Fashion Week partnered with Tmall to create an online platform for the designers and brands to debut their Fall 2020 collections from March 24 to March 30.
