How COVID-19 Changed the Face of the Fashion Industry
Like most other industries, the fashion industry took a major hit when the COVID-19 pandemic barged into our lives. I mean, we’re all prepared for theft, data breaches, industrial accidents, and even earthquakes! But a pandemic? Nuh-uh. You don’t see that coming.
Photo by Arturo Rey on Unsplash
It may not sound surprising to you that over three-fourths of the companies listed in fashion lost money in 2020. They were all forced to come up with tailored strategies that cater to their individual priorities, with no guidebook to aid them in such an unprecedented situation. And… they had to be quick at it.
Trends that were just starting to pave their way before the pandemic, like the integration of digital technology, accelerated as use of tech shot up. This meant that, while companies that were already heavily reliant on digital channels could service consumers immediately and win hearts, others needed to expand their capabilities to cope with this likely-permanent shift. The gap between the best-performing companies and others widened at an alarming pace. Some even had to declare bankruptcy, so they could reorganize and pay back their debts while retaining control over operations.
With travel restrictions, closed stores, and people staying home to protect themselves from the virus, the behavior of consumers changed significantly. Diminished economic growth also caused a sudden drop in the appetite for luxury items among most customers. The lack of high-spending tourists from Russia, China, and the Middle East was felt in the European fashion capitals of Paris, London, and Milan.
The effect of the Coronavirus is not limited to buying capacity making things worse. Large brands reacted to the onset of the pandemic in March 2020 by canceling previously accepted orders and withholding payment for goods that were completed. This caused an instant detrimental impact on the supply chain and called for action in the rewriting of relationships between buyers and suppliers. In fact, in an analysis by McKinsey, it was concluded that apparel value chains have the second-highest exposure to shocks, owing to their geographic footprint and labor-intensive nature.
The increase in fashion ruptures during the pandemic highlighted the lack of accountability and agility in transactional relationships. Understanding that contracts can be weak, that a concentrated supplier footprint is risky, and procurement partners are vulnerable led fashion companies to work towards developing deeper partnerships.
Fashion companies also needed to figure out ways to increase sales via an assortment approach that focused on demand. Given that the pandemic threw light on the necessity for a mindshift towards sustainability, 10% of executives in a McKinsey survey cited it as an opportunity for growth, second only to the digitalization of business processes. Retailers wishing to improve their ESG (environmental, social, and governance) performance are therefore expecting the same from their vendors. During the pandemic, there has also been a considerable spotlight on the exploitation of labor and the public is choosing brands that treat all employees and suppliers in the fashion value chain fairly.
Failing to adapt with a new consumer mindset would, if anything, worsen the overstocking of inventories. Reebok attempted to achieve this by making their production dependent on customer votes, and some other brands adopted made-to-order and just-in-time production models. Store formats like BOPIS (buy online pick up in-store) made customization, in-store ordering, and in-store returns easier.
Until the situation normalizes, at the very least, the entire fashion industry is forced to primarily rely on digital channels for growth. A new hybrid model of work has to be embraced and company cultures have to be adapted to ensure a sense of purpose in employees. For brands with ecosystems that largely depend on suppliers, and small-sized upcoming houses that can change and disrupt, like Louis Vuitton, coming out of the crisis alive meant turning every single one of their sales employees into store managers. The company only had 450 stores at first but developed software to let employees not only interact with customers but also actually close sales themselves, which meant that at the end of the year, there were effectively 10,000 stores for clients.
All that is to say that the pandemic brewed a great deal of innovation in the fashion industry, like all others. While the use of some new features, facilities, or innovations may decline after the world gets back to the new ‘normal’, there is no question that the rest of the new and convenient advances are here to stay. Overall, mostly all companies need to put a lot more focus on their digital, virtual presence, and stay on top of technical advancements that will surely drive a larger portion of the business from now on.
What other new innovations are you excited for or predict will emerge in the near future? Which of the recent advancements do you think are here to stay? Which do you think had a short lifetime? Let’s talk about it in the comments below.
