Retail Fashion’s “Missing Season”

Sales in fashion have been decimated. Why, and how, should companies respond?

For many industries, COVID-19 and its fallout have created unprecedented business landscapes and the retail fashion industry is largely open to decimation. As one of the largest wholesale and direct-to-consumer industries on the planet, many retailers have faced a global slate of tumbling consumer spending. In the long term, the retail fashion industry will recover, but in the short term the sudden upheaval of the global economic system has damaged some companies beyond recovery.

This exposure comes as the result of a perfect storm. When nations began responding to the COVID-19 crisis, those responses took place at varying rates and severity. With the nations of the world in such drastically different economic and healthful conditions, it’s been nearly impossible to manufacture, move and sell product—both in fashion and in other discretionary retail sectors.

COVID-19’s daisy-chained impacts began when China’s robust response to the spread of the virus saw manufacturing plants shuttered across their country for nearly ten weeks. As plants sat idle, concerns around the world grew that goods manufactured in China would soon see complete stockouts as the gap in production time grew. For the most part, stockouts were minimal—between a growing nervousness in consumer populations and product which was already on its way or waiting in distribution centres, many mass-produced goods remained available. This is true of many functional food and beverage goods as well as discretionary products.

But now, China has reopened its factories and manufacturing has resumed despite Europe and North America’s continued restrictions on all but essential services. Product has begun to ship again, only for distributors and companies to have nowhere to put it when it arrives in the West.

“I was speaking with one large retailer recently and they currently have 400 containers of ocean product parked between Asia and Canada,” says Canadian Alliance President William McKinnion. “Until retail opens up, that product can’t move.”1

Product that is parked is a product that can’t sell. 

For fashion retailers, this amounts to what might be called a missing season. Normally operating on a Spring/Summer and Fall/Winter product launch schedule, retailers globally designed, bought and ordered goods last year to sell as usual in the early months of 2020, only to watch the world grind to a halt. That product is precisely what remains in those parked containers, unable to be shipped to storefronts and unable to be sold.

“Because of this decline, there have been comparatively almost zero retail sales during this Spring/Summer season,” says McKinnon.1

China’s resumption of factory work will only exacerbate product gluts stateside, leaving companies with more goods than can easily be liquidated. 

How should fashion retailers respond to the unpredictable nature of today’s market, then? Prioritizing agility and flexibility are key. Spikes in storage demand throughout the COVID-19 crisis have led many carriers to begin selling their warehouse capacity on the spot market rather than accepting typical contract rates, so short term storage for product has become increasingly valuable in the 3PL sector. Retailers can offset these challenges by securing transport contracts as soon as possible; locking in capacity means goods can be moved strategically as planned, rather than be suddenly stranded if a rate is rejected by a carrier. 

In cases where private fleets are below capacity, supplementing shipments with non-discretionary goods ensures the smooth transportation of food and necessary items while also ensuring the timely transportation of discretionary product. Companies might also benefit from stripping down catalogues to items that are sure to sell, which prioritizes speed to market. In forgoing variety to optimize single SKU pallets and direct-to-store shipping, retailers are able to spread their product more efficiently. Further, retailers should begin conversations with varied warehousing and 3PL firms to source flexible, short term storage to space out the flow of goods so that downstream distribution centres aren’t overwhelmed.2

So, despite having sunk potentially massive amounts of capital into S/S offerings, fashion retailers are at risk of losing the entire season’s worth of sales and they must respond swiftly. The compounding effects of the pandemic don’t stop there—the ripple effects of this missing season will be felt long into the future.3

“I suspect some global fashion chains are considering a moratorium on production for several months and this is understandable,” McKinnon says. “I think the residual impact of what I am calling COVID Retail Trauma is going to change consumer spending in the short to mid terms. Long term, I think things could bounce back over several years. But we could see two to three years of very reticent consumer spending habits.”1

Cited

1 Stoddart, Jonathan. “Canadian Alliance President William McKinnon on the Challenges Facing Retail Fashion.” Canadian Alliance – Metro Vancouver Logistics & Warehousing (blog), May 15, 2020. https://canadianalliance.ca/industry-news/canadian-alliance-president-william-mckinnon-on-the-challenges-facing-retail-fashion/

2 “COVID-19: Five Priorities for Retail Supply Chain.” Accessed May 27, 2020. https://www.supplychaindigital.com/supply-chain-management/covid-19-five-priorities-retail-supply-chain

3 “Five Actions Retail Supply Chains Can Take to Navigate the Coronavirus Pandemic | McKinsey.” Accessed May 27, 2020. https://www.mckinsey.com/industries/retail/our-insights/five-actions-retail-supply-chains-can-take-to-navigate-the-coronavirus-pandemic

2020-05-28T14:04:35-07:00May 28th, 2020|