The fashion industry has been suddenly paused in recent months due to the deadly Coronavirus pandemic. The COVID-19 also exposed the vulnerability of the long and fragile supply chain system and the fault lines in its morals.
It is high time, that the industry as a whole to amend its weak spots and be strong and sustainable for COVID-19 post era. How will dramatic shifts in the global economy and consumer behavior in the post-coronavirus world impact fashion and what can be done to rewire a fashion system that is no longer working?
McKinsey & Company and Business of Fashion wrote in a coronavirus update to the State of Fashion 2020 report said, Fashion executives and business leaders are currently focusing on crisis management and contingency planning, but eventually we must shift towards re-imagining our industry altogether.
Globally the average market capitalization across apparel, fashion and luxury players plunged nearly 40% from the beginning of January through March 24.
The resulting ‘quarantine of consumption’ could accelerate some of these consumer shifts, such as a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action.
McKinsey estimates, in 2020 revenues for the apparel and footwear sector will contract between 27% to 30% YoY. For luxury fashion, the scenario is poorer: projections peg contraction between 35% to 39%.
“Combined with the McKinsey Global Fashion Index (MGFI) analysis, which found that 56 percent of global fashion companies were not earning their cost of capital in 2018, we expect a large number of global fashion companies to go bankrupt in the next 12 to 18 months,” McKinsey warned.
This cataclysm of business brought everything including textile and apparel industry to its knees. Together the supply and demand have taken a thrashing, and sales that have been slowed to a standstill.
“The resulting ‘quarantine of consumption’ could accelerate some of these consumer shifts, such as a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action,” McKinsey said.
“The coronavirus also presents fashion with a chance to reset and completely reshape the industry’s value chain—not to mention an opportunity to reassess the values by which we measure our actions.”
For one, fashion players will have to ramp up resilience planning and adapt their operating models, McKinsey said.
“Companies must adopt a recovery position based on impact severity to help prepare for the deployment of a recovery action plan. This means reassessing their geographical footprint, store network and growth opportunities, while also looking for any emerging whitespace, be it during recovery or an extended crisis period,” McKinsey said.
“In the event that collateral economic damage from the pandemic continues for an extended period of time, brands should review cost bases to identify measures for quick wins, set up employee plans to assess workforce decisions, and rationalize overhead spend to plan for potential store closures.”
“Speed and adaptability are of the essence for this crisis. But when the first signs of normalcy do begin to emerge, companies are cautioned not to be complacent,” McKinsey said.
“This may signal the end of ‘extreme consumerism’ for some consumers who reject the idea of buying goods in large volumes,” McKinsey said. “Brands that are able to reorient their missions and business models in more sustainable ways will be able to cater to a more captive audience than ever before.”
Fashion companies will have to consider innovative ways to shrink stock and reinfuse value into their products, like accelerating “nascent sustainability trends,” the report noted.
“For many players, repurposing existing stock for new seasons will be a more viable option than recycling or upcycling with fabric additions or extractions,” McKinsey said. “Other opportunities include personalization, customer experience and a re-evaluation of the company’s fashion calendar, such as moving monthly drops into later seasons.”
Businesses will have to reassess normal production runs, implementing nearshoring as the desire for product made closer to home ramps up, and leveraging new manufacturing becomes an increasingly viable alternative. And sustainability will have to come to the fore as the new way to value a business as consumers retreat from over-consumption and irresponsible business practices become considerably less acceptable.
“To cope with new restrictions, mitigate the damaging impact of the pandemic and adapt to economic and consumer shifts, companies must introduce new tools and strategies across the value chain to future-proof their business models,” McKinsey said. “Fashion players must harness these innovations and scale up those that work in order to make radical and enduring changes to their organizations—and to the wider industry—after the dust settles.”