Brands

Fashion Brands and the effect of the Coronavirus

Many fashion brands in North America and Europe were struggling to keep their businesses running prior to coronavirus outbreak, some even faced insolvency like UK retailer Laura Ashley. In a report on the state of fashion by McKinsey and Business of Fashion, it pointed out the number of these distressed fashion companies were 34 percent, and they expect this figure to grow to reach 80 percent. When evaluating how fashion companies in their Global Fashion Index, McKinsey highlighted the term “value destroyers” which means companies with profits that do not exceed their estimated cost of capital. As the coronavirus hits worldwide, its unlikely value destroyers will be able to survive.  

After the Coronavirus pandemic slows (hopefully it will stop spreading among people all around the world) fashion companies will be faced with an excess in inventory for collections made ready prior to the pandemic, in order to eliminate these products, one option might be, wholesale re-sellers starting to be more active to take away these unsold clothes, it can be an opportunity for online wholesale and discount re-sellers, they usually sell at lower prices which makes them a preferred choice for many shoppers, wholesale re-sellers usually operate at lower margins, for this reason they should approach their operations in a savvy manner to earn more revenue, if they scaled their selling they might be able to achieve good profit.

The coronavirus pandemic although is not the main cause but it will accelerate people’s tendency to cut their spending. Looking to buy an outfit at a discounted price can be the most evident consumer behavior post coronavirus. It will be some time before shoppers can get back to purchase at full price since they have to be more careful with their expenditures and fashion is one item they are willing to give up in order to afford other living commodities.

Big fashion companies are not shield from changes, this is where crisis can be turned to opportunities for investors, according to McKinsey report “Asian and Middle Eastern investors will push on with cross-border acquisitions while the markets are down”.

Turkey and textile factories

Turkey is expected to have an increase in order demand for clothing production with many fashion brands around the world shifting their orders from China to Turkey as mentioned by Textilegence. I have spent couple of years in Turkey, I don’t think their local market will face significate change in their consumer purchase spending, their domestic market already have a large number of discount re-sellers that take mostly mid-market brands unsold inventory and resell it at a lower price, there is also bazars which take place on certain days during the week that offer factory clothing at a very affordable prices. wholesale offline and online platforms already exist as players in the Turkish domestic clothing market (beside selling internationally), we will have to see if the online re-sellers will be as effective as the offline.

Other middle eastern markets like Jordan has a wide number of shops, very well-known in the capital Amman as discounted price re-sellers, most of their items come from brands like Mango, Zara and Bershka, alongside clothes manufactured in China, unnecessarily with known brand name attached to them. These resellers can play part in taking fashion brands excess in inventory, although it should be noted that the Jordanian consumer market is considerably small compared to other countries like Egypt which has a larger market powered by the high density of its population which can play larger role in the wholesale re-selling process.

The signs reflect a downturn for many fashion brands, but the adaptation of e-commerce has decreased the harm, many livestream product promotion are being made via the meeting app ‘Zoom’ which shows how resilient fashion companies can be. We will have to wait and see who will stay in the fashion business and who will be out.

Moda Bastet aims to support the fashion industry, if you see a photograph that belongs to you on this site, it’s because I thought it is awesome. If the photograph is missing a link, I have not been able to find you and need you to get in touch so it can be credited correctly. However, if you don’t want to share it, I will gladly remove anything you ask me to, so please let me know. You can get in touch through the contact form.      

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