• COVID-19 pandemic will continue to have impacts on the Fashion Industry
• Online shopping will be able to cope with the brick and mortar closures
• Now more than ever, retailers will have to be more creative and proactive in this period of uncertainty
THE CURRENT SITUATION OF THE PANDEMIC
The fashion industry has been shaken by the spread of the COVID-19 or Coronavirus during its most important period: the “Big 4” Fashion weeks. This virus, recognised by the World Organization of Health as a pandemic, has now forced all the fashion sector, from mass-market to luxury, to take aggressive measures such as closing their ateliers, closing their stores for what is hoped to be a specific period. Apart from the Asian market, almost all markets have now closed their stores as a consequence of the Coronavirus. The effects on the business due to the virus have and will keep having severe repercussions for all retailers, money-wise and stock-wise as well. For instance, on March 17th, the most famous Spanish fast-fashion group, Inditex, announced that they would be closing more than 3,785 stores which led to Amancio Ortega announcing that around €300m of inventory stock will be written off due to the Coronavirus pandemic.
Adding to that, main fashion events that shape the whole fashion industry have now either been cancelled or postponed indefinitely, from the MET Gala, occurring every first Monday of May, to fashion weeks and trade fairs.
As we are still in a completely uncertain period, there are several unanswered questions. How long will this period last? What is going to be the impacts not only on retailers and customers but on the entire supply chain as well? The retailers’ actions have and will still have a significant effect on the leading factories of the whole fashion industry. How will it impact the factories and the entire production process? At RETVIEWS, we have decided to write blog articles to keep you updated with the Fashion Industry during this period that will change the future of fashion.
“With the global expansion of the virus, priorities have shifted, and consumers do not buy more fashion garments online“
IMPACT ON THE CONSUMERS PURCHASING HABITS
The general lockdown has impacted the consumers’ habits: stores have been closed (apart from supermarkets), social interactions have to be reduced to a bare minimum. So, what else can one do apart from Netflix and chill? Online shopping!
The quarantine announcement in Central and Southern Europe, beginning of March, led to an increase in online sales according to Co-marketing. In regards to the fashion industry, an increase in conversion rate (+7.5%) could be seen, especially in ready-to-wear products. At the same time, the traffic and number of transactions remained the same. It showed the tendency of the consumers to buy more whenever they were on their favourite clothing website. In addition to buying more online, the time consumers were spending on these websites also increased by 13.9%.
Now, we are reaching another peak. The United States, as well as the United Kingdom, have announced strict lockdown measures. This pandemic has also impacted Latin America and Africa. The tables have now turned for fashion e-commerce with a 14% decrease in the number of transactions.
What could be the reason for this shift? Already at the early stage, consumers were not buying more often but were purchasing more significant amounts. With the global expansion of the virus, priorities have shifted, and consumers do not buy more clothes and other accessories online anymore.
One of the KPIs companies should keep a close eye on is the evolution of the “out-of-stock”. As online is now the only selling platform, retailers should remain cautious not to end up with a too high share of out-of-stock, now more than ever. With RETVIEWS, it is easy for fashion retailers to get an excellent benchmark to track their stock situation as compared to their direct competitors.
BRANDS PRICE ADJUSTMENT: ARE THERE ANY EXTRA DISCOUNTS OR OFFERS?
One would expect the fashion companies to give discounts and/or special offers to their customers to increase their online sales, as it remains the only channel available for selling.
However, it is not the case. There has been no added product (see the 0% in the chart) nor significant added discounts since the announcement of global quarantine. The only articles discounted now are the ones from the so-called mid-season sales, which is the perfect period for retailers to start fresh for the new upcoming season and have the best seasonal assortment while reducing the winterish garments. As this period is still ongoing, retailers will probably not take any extra measures pricing wise.
One of the possible reasons why retailers have not yet added any discount might be the out-of-stock. As COVID-19 has also impacted the supply chain, retailers will have to be extra careful with putting articles on sales as they might run out of stock more quickly. Aside from that, this might be an extra cost that they can avoid.
It is also noteworthy to refer that, as mentioned above, people were spending more time shopping online, despite having extra discounts. As the share of articles in reduction is low, it shows that they are willing to pay their garments full price. Per se, there is no real need for fashion companies to add any extra discounts yet.
CHANGES IN MARKETING AND COMMUNICATION STRATEGIES
Adding to that, in this period of uncertainty, companies might become disconnected with their customers. It is essential for them, a fortiori, to stay engaged with their customers and be creative. Social media is the best channel right now to increase engagement with the customers.
One example could be doing like Stradivarius did on Monday, March 23rd with their #musictostayhome, creating a live stream with the famous Mexican singer and actress, Danna Paola from the trendy Netflix TV show ELITE. Or like Oysho did, fostering its loungewear with “when I stay at home” collection. H&M also added on its home page a selection of garments mixing all genders and age and homeware for a more “cosy” experience every day.
Transparency is the keyword of this Coronavirus period for retailers. They can maintain goodwill and minimise the possible damages on brand loyalty by showing their customers they share their concerns and are working on the challenges faced by the customers. For instance, from luxury to mass-market, at the early stage of the situation, many brands used social media and the press to keep their customers informed about their intention of starting research and development against the Coronavirus. For instance, H&M Foundation is helping by donating USD 500,000 to the Covid-19 Solidarity Response Fund launched by the United Nations Foundation. Another example of communication is LVMH and Kering, the most prominent luxury conglomerates. They are producing anti-bacterial gels as it is facing a shortage or BA&SH is giving 25% of the profits to the hospital workers.
Now, newsletters are also sent to customers. Within few seconds with RETVIEWS, we can see how all retailers are informing their customers and what is their key message. The first type of newsletters sent were the ones telling the customers that, due to government decisions, stores had to be shut down, but the online channel is still available. The second wave of newsletters informed the customers about the various offers made by the retailers. For instance, retailers, such as Zara and H&M, are now offering free delivery for any online purchases. But also, like Etam, retailers have now extended the returns policies providing a more extended period of return to its customers.
On top of that, actions from retailers like Zara are showing to their consumers that they care. They show how retailers will do everything in their power to help during the pandemic situation. For instance, Amancio Ortega, founder of Inditex, has been transparent about the group’s actions. He has announced that the group will be delivering 300,000 masks per week and will be involved in the production of health-protective equipment to help the first-line workers such as medical workers but also cashiers and police officers, who are still working outside to help us all be safe inside.
WHAT COMES NEXT
Since the Coronavirus outbreak, many actions have been taken by Fashion retailers. Most actions are focusing on marketing and communication as compared to merchandising. Newsletters have been sent, and social media posts through all channels can be seen everywhere.
However, the impacts of the virus on the industry are not going to change soon. All the most significant events of the Fashion industry have been impacted by the situation, resulting in an indefinite cancellation or postponement of the essential events for the sector.
The Coronavirus has had, indeed, a limpid impact on the selling of all retailers, leading them only to be capable of using their online channel. Will this one be sufficient for the retailers to cope with the drop in revenue due to the pandemic? Anne Critchlow, a retail analyst at Société Générale, believes that “since online represents a relatively small portion of overall sales, that won’t be able to make up for the closures”. It is without mentioning the future impacts on the warehouses that the Coronavirus will have; maybe leading to the closure of them as well. But also the factories. For instance, in Bangladesh, if this situation continues, what will be the fate of the workers that are suffering from something that kills more than a virus: poverty?
It is noteworthy to mention the fact that economists have recently downgraded “global GDP expectations anywhere from 0.3% to 0.7% for 2020” resulting in a significant impact on an already tenuous growth.
The future of retail and the fashion industry is still uncertain for companies. Will the marketing actions be sufficient and grab more share of the business? What actions are going to be taken regarding the assortment? Are retailers going to start a massive discount program on their website when people begin to buy less? Wait and see.
Interested in more data about fashion brands? Find more fashion data here.