The Impact of COVID-19 on the Fashion Industry in the United States
The Fashion Industry is a 1.2 trillion global industry. It has 4% of the market share and undoubtedly has its unremovable position in the U.S. economy. Approximately 1.9 million people are employed in this industry (Ref. 1). By 2019, the industry already has a worldwide revenue of $545 billion U.S. dollars, and is estimated to rise to $713 billion U.S. dollars by 2022 (Ref. 2). However, with the unexpected pandemic, we are now unsure of this estimation, but the statistics still highlight the wide range of influence the Fashion Industry has on our nation.
Sales Go Down
The fashion industry has been hit hard by the pandemic, and some of the well-known fashion brands have filed for bankruptcy. The first major brand to fall was J. Crew, which is known for its jeans, khakis and basic clothing. CEO Jan Singer filed for bankruptcy protection on May 4 and hopes to achieve a financial restructuring. Neiman Marcus, another well-known department store brand, filed for Chapter 11 bankruptcy protection on May 7. Other brands that filed for bankruptcy include John Varvatos, J. Hillburn, True Religion, Bldwn, The Modist, Elizabeth Suzann, Anthom and J.C. Penney (Ref. 9).
LVMH, the largest luxury conglomerate, is also significantly impacted by COVID-19. Brands under this company include Louis Vuitton, Christian Dior, Givenchy, Fendi, Loewe, etc. Due to the massive decrease in sales and inability to manufacture more collections, its profit dropped by 27% compared to last year. In the first two quarters, LVMH’s net profit decreased by 84%, or $612.29 million. CFO of LVMH Guiony thinks that the reason for such staggering statistics is because of the closures of physical stores. Also, LVMH is vertically integrated. Guiony says, “We do manufacture inside, and so we suffer some lack of absorption of fixed costs.” This seemingly beneficial factor of the company has now turned against it
Current Issues with the Fashion Industry
The critical issues of the fashion industry have arisen due to the coronavirus, but in truth the industry has been struggling with these problems for a long time now. One of the major issues is the timing of delivery of collections. Right now, the collections of fashion pieces are presented on fashion shows six months prior to their arrivals in stores. This was an old method to control visibility and promotion of the fashion pieces. However, now in the age of digital media, this gap of six months leaves fast fashion brands more than enough time to copy their works, manufacture them and sell them to customers before the high fashion designers do.
This delay in schedule also means that products are received way earlier to retailers than their expected purchasing period. Now seen as aged products, retailers would sell these products on discount, thus less people are willing to purchase the products at full price at their actual brand stores. Heavy discounting such as Black Friday sales really consume a huge part of the full-price sales. It makes sense, because no one wants to buy the same product at a higher price
Focus on Online Presence
To recover the loss of sales incurred from the closedown of physical stores, apparel companies should learn now to make their website more appealing to a wider range of customers —– international customers. First, the website itself must look appealing, or at least professional. The appearance of the website is the first step to attracting new customers. Then, in order to attract international customers, first make sure that the website can be reached in different areas around the world. There should also be a variety of different languages that customers can select to use on the website, as not all customers are fluent in English. Next, photos of clothes on sale should stay consistent (same angle, etc.) and high-quality. Since customers are unable to visit physical stores, clear photography of clothes provides them with a better buying experience. Also, a size chart that can convert units of different systems is also important and convenient for international customers.
Changing from Mass Production to Made-to-Measure
Mass production is very common in the fashion industry. Before an apparel collection comes out, an apparel company first places an order in a factory, then the huge amount of manufactured clothes is shipped to stores to sell to the customers. This might have worked well in the past years, when there wasn’t pandemic. However, now due to the coronavirus, sales in the entire fashion industry has dropped significantly. Many orders have been cancelled, which leaves factories facing bankruptcy. On the other hand, companies are also left with huge amounts of unwanted stocks. A tactic in fixing this problem is to switch from mass production to made-to-measure .
Source: Business Economic, Auth: Rebecca Chen