The newest Reply report on COVID-19 is dedicated at the impact of the crisis on the fashion industry across Europe and in the USA, both from a consumer and industry perspective. Based on Google search data, the study examines how changes will affect fashion and brands.
As one of the most globalized industries, the fashion industry is severely impacted during global crisis lockdown:
- With physical stores forced to close across Europe, it has become impossible for brands to generate offline sales.
- Consumer interest in fashion items and brands drops. Companies need to respond to the new needs in terms of product offering, distribution channels and communication.
- While offline fashion events and fashion travel are cancelled, e-commerce is not immune to the lockdown with declines in performance, although to a lesser degree.
- As China plays a decisive role for the entire fashion industry, the recovery in demand provides an indication of the coming recovery worldwide.
Consumers interest for fashion has decreased during lockdown at a high rate
Consumer interest for fashion drops as a first response to the Corona crisis and lockdown, as consumers’ priority shifts to necessary at present. Comparing countries, Italy is most affected by the effect (49% drop the average value of all countries studied is 23% compared to the previous year. Only France recorded a slightly smaller loss of 16%.
While all major fashion categories loose, loungewear stands out positively. Throughout the lockdown, many brands and social media sites push (home) leisure wear with several social media activities such as hashtag competition, taking the category to the top of e-commerce trends.
Setbacks in supply and demand
As the fashion industry is highly globalised, the pandemic causes problems to supply and demand. Companies have to face the crisis on several fronts at once: imposed lockdowns stop manufacturing (first in China, then in Italy and other countries), while store lockdowns and financial uncertainties freeze spending.
With 70% of all fashion purchases made offline, lockdown of retail stores has cut this part of the business off. Online retailers have been able to keep their business running, however, not to a degree that would replace the offline plunge. The steep decrease on the demand side (-30% in March 2020) has significantly impacted business.
Consequently, fashion brands start moving towards digital solutions along the entire value chain, beyond e-commerce, digitizing fashion campaigns and fashion shows, offering digital look books, and, most notably, reaching out to consumers via social media channels and live streaming to advertise their offering. This shift in operation allows agile players to thrive.
Profound consumer behavior shift in luxury
The market for fashionable luxury goods is the hardest hit: shopping behaviour and the ongoing changes are affecting luxury first, and fastest. As consumers reduce their spending on fashion, they look for reduced offers and bargains. Brands must find ways to regain value to meet the “discount mentality”. At the same time, consumers buy fewer articles, but high-quality ones. This also has effects on secondhand areas.
Leading luxury goods manufacturers must increasingly establish personal relationships with their customers, both online and offline. This is particularly true for luxury brands that address the Chinese consumer, one of the industry’s most important sales markets. The first promising signs are coming from China, which appears to be entering a recovery phase. First promising signs are coming from China as the country enters the recovery phase. While a slow increase in Chinese consumption is becoming apparent, three key areas can be identified that will dominate the entire industry:
Digital mastery is essential for brands to survive the pandemic. Companies that emerge from the crisis will have to build more personal relationships with their customers – online and offline. Once they have mastered the crisis, companies are usually able to make faster decisions. They can also begin to test digital marketing internally and then move to a faster, more agile and optimized marketing model for customers.
Understanding and using a new customer mentality
Even prior to the crisis, fashion shoppers turned away from pure “prestige consumption” and showed more moderate consumer behaviour. The crisis will reinforce this effect. Brands must therefore rethink their value proposition in order to respond to this development.
Follow the innovation imperative
New tools and strategies are needed to cope with the effects of the crisis, calling for innovations at virtually all steps of the value chain: from new processes for local production and planning, to refocusing supply chains, and re-thinking consumer engagement. This will work in particular for brands that manage to build up their digital marketing and communication capabilities in fast decision-making cycles.