by MIKE CHAIKEN
COVID-19 has hit the global economy hard.
Industries in general have been taking some mighty hits as the economy falters.
But, the fashion industry has been hit far worse than other industries. It also has been hit harder than at any other time in the history of the industry, according to a report from the Business of Fashion and Informa Markets.
Nick Blunden, president of Business of Fashion, delivered the sobering message in a webinar, “The State of Fashion: Coronavirus Update” on Oct. 15.
The report was an addendum to a report on the industry issued last fall. But following the COVID-19 crisis, Business of Fashion took another look at how fashion had been impacted by the pandemic.
The message delivered by Blunden was not good. Several times in his recap of the report, Blunden called the situation facing the fashion industry “unprecedented.”
“COVID has had a huge impact on the global economy,” said Blunden. “Fashion has been hit harder than most because of the nature of the global fashion industry.
One of the unprecedented aspects of the current situation, Blunden explained is that the fashion industry is being hit hard on the demand side as well as the supply side of the business. Usually in economic downturns, said Blunden, the impact will be on demand or supply– but not both.
On the demand side, Blunden said fashion has lost significant sales because of store closures across the globe. This has hit especially hard those fashion companies that depend on physical retail revenue.
“We’ve also seen an extraordinary decline in spending,” said Blunden. Consumers not only are spending less they have but they also have become averse to visiting public spaces like retail stores. Again, he said this impacts companies that rely on physical sales.
There are some companies in the fashion industry that have been fortunate because they already relied on digital sales, said Blunden. But the industry as a whole has been slow to pick up on digital opportunities.
Even those companies equipped to transition to digital sales have been negatively impacted by COVID, said Blunden. The margins for digital sales are not as high as they are for physical sales, said the BOF president.
On the supply side, Blunden said the economic crisis has left fashion companies with excessive inventory and little demand for the inventory.
Fashion, he noted, is a discretionary purchase for consumers.
Additionally, Blunden noted the fashion industry’s supply chains have been seriously impacted.
This disruption in the supply chain has hit workers in the industry hard, increasing unemployment, said Blunden. In poorer nations such as India and Bangladesh, the disruption in the supply chain could lead to disease and hunger for workers who depend on fashion for their livelihoods.
COVID-19 also will have a serious impact on the value of fashion companies, said Blunden.
National economies are shrinking, with many countries experiencing a 3%-4% contraction in gross domestic product, said Blunden.
However, Blunden said, the fashion industry as a whole will see a 27%-30% drop in value in an industry valued at $2.5 trillion pre-pandemic. Luxury fashion will see an even faster clip for contraction, shrinking 35#-39% from a value of $110-120 billion.
Blunden said there is expected to be 3%-4% growth in 2021. However, he said, that growth won’t make up for the losses in 2020
“It’s pretty sobering,” said Blunden.