The fashion industry is suffering greatly from the Covid crisis and the resulting lockdowns on top of other restrictions on store visits. But something more fundamental has also shifted, assesses Dwayne Branch, Senior Manager at Deloitte. “An ever-growing list of stores will have to take a good look in the mirror,” he says.
Squeezed middle segment
“The impact of the Covid crisis on the fashion industry is in itself no different than in other consumer goods industries, especially if they also have retail outlets,” Branch says. “For those that have a strong online presence, it’s a two-sided story: painful for brick-and-mortar stores, but unprecedented growth rates for the online side of the business.”
Deloitte analysed trends in e-commerce across Europe. “Nowhere was growth as strong as in the UK, but many other countries – including Belgium – were not far behind with double-digit growth.” Branch also notes an acceleration in the trend of mid-market players being challenged by luxury players on the one hand and price-fighters on the other.
A recurring theme in this evolution of the fashion industry is the future of the fast fashion model. If it still holds a future. Branch believes it does: “Fast fashion has not died, but it is suffering from a bad cold, and something should be done about it,” he says. “It is clear that sustainability has claimed a place at the top of the agenda. The traditional players in the fast fashion industry will have to adapt to continue to be relevant.”
Fast fashion remains a relevant model
Branch is careful not to declare the concept dead: “There are still customers who, when they see a celebrity wearing a certain outfit, want a similar one as soon as possible. Responding quickly with new collections remains a relevant model. But customers are becoming increasingly critical about the materials used in the collections and how sustainable the entire production chain of the clothing is.”
The Covid crisis has left its mark clearly, and Branch does not expect a rapid return to the ‘old normal’ once the pandemic is behind us. ” The question is how old the old normal was, to begin with,” he says grinningly.
No wave of bankruptcies thanks to the support from banks and governments
“We expect in any case that several Covid trends will outlive the virus. We are now shopping less because of the circumstances, but I expect this to continue, even after Covid. People are becoming more frugal and are less likely to throw clothes out. And they don’t have to, because clothes don’t wear out as quickly. Working from home will continue at least partially after Covid. So we have to go to work less often, which also reduces the need for new clothing.”
It is striking that the crisis has not yet led to a heavy wave of bankruptcies or restructuring in the industry, Branch also notes. “That has everything to do with the support the industry is receiving from banks – in the form of payment deferrals and bridging loans – and the government – in the form of a moratorium on bankruptcies and all kinds of schemes for economic unemployment. That does not mean, however, that no problems are lying beneath the surface. When those safety nets fall away, the bill will follow. An increasing number of companies will then have to take a critical look in the mirror when it comes to financing and working capital.”
RetailDetail Fashion Congress
On March 25, Retail Detail is organising the Fashion Congress. Peter De Sutter (e5 Mode), Dwayne Branch (Deloitte Belgium), Dirk Smet (WASTED Atelier) and Laurent Mainil (Crunch Analytics) will share their vision on tomorrow’s fashion. Buy your tickets here.
