The fashion industry has been fundamentally altered by the impact of the pandemic, some organisations being in deep trouble. Inevitably, some brands and retailers will have a harder time to recover, but those retailers with established supplier partnerships are likely to restore faster, even so, it may take months.
How apparel supply chains have been affected in 2020
•Consumer demand for clothing has declined and spending has fallen sharply. This is due to both a drop in people’s disposable income and the limited opportunity for socialising. Buying clothes is not a priority, leaving many fashion companies with excess stock.
•When consumers purchase clothing, they are favouring discount retailers such as Primark and big supermarket chains. Despite this, store chains such as H&M have closed many stores and many mid-price chains have developed e-Commerce solutions to protect some of their business.
•Factory and store closures resulted in cancelled orders, including those orders already in transit. Suppliers have not been paid which has created losses at all levels. Social distancing requirements have impacted manufacturing and distribution capacity.
•Thousands of jobs have been lost in all areas: manufacturing, distribution, and retail. The pandemic has forced many manufacturers and distributors to lay off or suspend thousands of workers, often without severance pay. Others have been able to work part-time for reduced pay.
•The pandemic has revealed inefficiencies in fashion retail supply chains highlighting the need to rethink and restructure their processes, by being more agile and responsive to new challenges and make better use of the data and information they have.
According to Alistair Knox, chairman of the Association of Suppliers to the British Clothing Industry (ASBCI), an industry that was once a core part of the British economy is now 95% imports, mostly sourced from China and South Asia. The retail sector is highly concentrated in the UK, with around 80% of clothing volume sold by fewer than 20 brands. This includes the major supermarket chains, as their clothing brands like George, F&F, Tu and Nutmeg compete with high street giants such as Next, Primark and M&S.
Rebuilding apparel supply chains
Clearly, resilient supply chains will be essential to apparel businesses which will need to operate under a radically different set of circumstances. Achim Berg, global leader of the Apparel, Fashion & Luxury Group at McKinsey, states the crisis will have a long-term impact but delivers a positive message that we have an opportunity “to redesign the industry’s value chain and to focus on the values by which we measure our actions”.
Organisations will need to develop supplier partnerships and build cross-tier relationships with peers to prosper. For example, The Gap chain plans to close its distribution centre in the UK Midlands in 2021 as well as its retail stores in the UK and Europe. It is expected to develop partnerships with existing retailers to market its brand across the UK and Europe.
Many legacy systems need a radical review and upgrade. Manufacturers and distributors need to improve inefficient processes, by adopting software solutions and making full use of their data. Technology will not solve every problem, but it can be used to streamline transactions and communication with suppliers and customers.
Customers are expected to buy fewer items but of higher quality and with better longevity. They care about provenance, child labour, over-use of water and re-usable packaging. Brands and retailers need to make sustainability integral to their strategy – the fashion industry is where consumers expect to see their values reflected in the products they purchase.
The need for speed
Time is a major pressure on fast-fashion retailing; the industry needs quick responses. 5%-10% of clothing demand could be satisfied from within the UK and Eastern Europe which would mitigate against a total supply disruption in any future global shut-down.
The apparel industry has survived through tough times and austerity. Our current position is highlighting the need for both creativity and innovation. Those who adapt fastest to the new situation will survive and prosper. The demand for apparel could return when work-from-home lessens and social mixing resumes, potentially as early as 2021.
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