According to the Wall Street Journal, U.S. apparel retailers such as J Crew, Neiman Marcus and J.C. Penney have been forced to close due to the COVID-19 epidemic and are currently discussing bankruptcy with creditors. Although Well-known retailers Macy’s and Simon Property Company, the owner of the largest outlet centers in the United States, plan to gradually resume operations in areas where the market is unblocked, but industry players are worried about the sluggish consumer market.
According to the “The State of Fashion: Coronavirus Update” report released by McKinsey consulting firm in April 2020, the global economy Factors such as recession and changes in consumer thinking have pushed the fashion industry into a wave of transformation and consolidation. To win, businesses must have forward-looking and adaptable thinking.
I would like to excerpt the following highlights from the Wall Street Journal report and McKinsey & Company report:
(1) The global economic recession and corporate response methods:
1. The fashion industry (including apparel and footwear) is susceptible to the impact of the boom. The global fashion industry’s annual revenue before the impact of the epidemic was approximately 2.5 trillion US dollars. It is estimated that the global fashion industry revenue will shrink by 27-30% in 2020. If physical stores remain closed for two months, McKinsey Consulting predicts that up to 80% of listed fashion companies in North America and Europe will face financial difficulties in the future. More companies will declare bankruptcy in 12 to 18 months, accelerating the consolidation trend in the industry where the best and the worst will win.
2. Macy’s plans to resume operations at 68 stores on May 4, and is expected to open 775 stores across the United States in the next six weeks, and will strengthen employee health Inspections, requiring employees to wear masks, widespread hand washing, and glass partitions at checkout counters, etc. However, the McKinsey report pointed out that based on the experience of past financial crises and 911 terrorist attacks, it may take two years for consumer confidence to return to normal.
3. Therefore, fashion retailers should formulate a recovery action plan, close unprofitable stores, identify areas with growth potential, and use “speed” and “flexibility” To adjust the supply chain, look for suppliers close to the market, and flexibly adjust production lines and delivery according to market changes at any time. Enterprises can also shorten the product design process through 3D printing technology, virtual proofing and digital sample display technology.
(2) Changes in consumer thinking and corporate response methods:
1. The epidemic has made every household As income decreases, more than 65% of consumers in the United States and Europe are expected to reduce spending on apparel products, and 56% of consumers indicate that promotions will be the main reason for future purchases. Therefore, apparel companies are facing pressure from inventory and competition to reduce prices, especially for seasonal products. In terms of inventory and promotion, it is expected that mid-price brands will be affected by consumers switching to lower-priced products. As for high-end luxury brands, they must think about innovative sales methods, otherwise excessive price cuts will destroy brand value.
2. In addition, the trend of consumerism may accelerate the decline after the epidemic. Consumers will pay more attention to the sustainability requirements of clothing brands. The industry can also use This opportunity uses product sustainability to create market segmentation, including strengthening the upcycling of original inventory products and the resale or recycling of second-hand clothing.
3. Sheltering from the epidemic and social distancing at home have highlighted the importance of e-commerce. Manufacturers that rely heavily on physical retail channels have been hardest hit. Those who own brands such as Kate Spade and Coach Tapestry said the epidemic has accelerated the company’s digitalization trend. A McKinsey report points out that about 25% of consumers in the United States and Europe will increase their consumption through social software channels. Therefore, businesses should put digital considerations into their marketing methods and channel warehousing planning, such as developing potential customers through social software and live streaming. , warehousing must also be adjusted to place small quantities in multiple locations.
