The State of Fashion /Coronavirus Update
State of Market
Informa Markets Fashion
Coronavirus update with Nick Blunden, president, BofF
Wednesday, October 14, 2020
The State of Fashion with Nick Blunden summary:
I tuned in to the Business of Fashion’s Nick Blunden talk about what a huge impact Covid is having on the fashion industry. He shared a lot of statistics affecting the fashion industry. Starting with the fact that it is hit harder than most with a 2.5 trillion contribution to the economy worldwide.
Fashion is a discretionary purchase.
Never before has the demand side and supply side been depleted to this level. The crisis is unprecedented in lost sales and store closures.
Consumer sentiment stopped, there were pretty much no sales. People were feeling unsure about the need for clothing since for the most part, it is a discretionary expenditure.
Fashion is a 5% of GDP dropped worldwide and upwards of 10% drop in Italy.
Physical sales were prevalent in the past, contrary to what is assumed that most sales have shifted toward online. Especially in the luxury space where most sales were made in a brick and mortar store.
Pre corona department store shopping dropped 27-30% from what it was when it was already on the decline. The second wave of lockdown caused 80% to go into chapter 11. In the future, Physical retail will look different with social distancing.
The Luxury segment is a 500 billion industry and had a 120 billion dollar drop. It was hit harder because it is even more discretionary spending than overall, therefore more heavily hit.
Its market is more reliant on travel. Typically it has lower levels of online shopping and is
more dependent on department stores. In the recession of 2008 a 5% decline in the overall market, but luxury was an 8% decline.
Although there is an additional channel shift to e-commerce, only some have benefitted, impacted the demand side and supply side, and created an inventory misalignment.
Some stores could not get their hands on some goods, while others had a supply-side creating a global phenomenon, causing an incredible impact on workers particularly low-cost sources and fashion hubs resulting in hunger and disease.
What will the industry look like after the virus? The whole industry is due for a reset.
Five themes spread across three categories.
First, important survival instincts will not bounce back the same, it will be a long hard road, the global economy will take years. It has to think very strategically, and not to return anytime soon. It will take years.
They need to start thinking about a recovery plan. First, a geographic footprint will change to more localized retail. Supply chains will change, interesting changes predict shortening supply chains closer to key markets, move from pull than a push model. ( instead of having an inventory of goods, more made to order)
Growth opportunities for the one in three who are prepared. What recovery looks like is following the impact of consumer shifts which are myriad.
- The old fashion industry contracting, looking for a deal, match with massive industry inventory shift to a discounting culture is going to be difficult.
- In context, the discount strategy has to be careful to get rid of stock.
- Think carefully about specific channels.
Discounts and value for the consumer are now starting to think about sustainability and diversity, purpose vision, spend with those companies for value-driven will see gains and sell at full price.
Much bigger drivers going forward. Digital escalation is so profound, deconstructed in a way. Accelerated consumer trends moving forward towards a digital future, grown dramatically, those we believe will continue past the pandemic.
Fashion investing in digital talent where they can. Digital-first mindset, buy online, pick up in-store. Can be less profitable, but the consumer is saying it is important a primary priority.
What impacts us as a whole is recognizing considerable shake out of consolidation. Struggling to cover the cost of capital, 2018 super winners Nike, Burberry 177% responsible for the most profit. Many businesses are born in a crisis. Travel /luxury will rebound more quickly -exposed to the wealth of China.
Innovation will ultimately be virtual, how are you going to thrive in the new normal?
How will you deal with excess stock?
How will you accelerate offline sales?
How can you benefit?
How can you think about innovation?
All can build a better industry.
As emerging designers of a brand, there are opportunities in how you engage.
Platforms like farfetched, give opportunities to invest and engage.
Very important to think about community, building a loyal community.
Does it fit that authentic, sustainable, purpose, value-driven?
One company in particular Nike has all of these elements including customization and they own the customer relationship.
At the very heart of the strategy, higher-end Gucci has done some incredible changes. Being agile, moved towards a season-less collection with two shows a year rather than six or seven.
https://www.gucci.com/us/en/st/capsule/prefall-preview is a wonderful site to peruse.
The Resale market is extremely popular with companies like Real Real.
The resale and second-hand market is being tried all over, for instance with Levi’s to Nordstroms selling their used garments in stores.
Where do the influencers and social media fit in? See the link for Good On You sustainable influencers going forward. They are more important than ever. The inspiration plays a massively important role going forward.
Concluding with the disruption of physical fashion shows becoming almost obsolete. Showing virtually will be more popular, and shows are fewer and farther between.