These are tough weeks for the textile and fashion industry. The Coronavirus is testing the large-scale viability of the fashion industry and how unprepared it is for global shocks. Only in the course of 3 months, the shock that the industry has suffered from both the supply side and the demand side has been unusual. Almost uniquely similar to those that occur in times of war.
As the world turns off its engines, so do fashions fragile supply chains?
Effects on Sales
Sales from both major global retailers and small businesses are plummeting. Vlone Shirt store closures imposed to curb the rapid spread of COVID-19 makes falling incomes and manufacturers are making daily cancellations of orders and using contingency measure to resurface supply chains once the global order is restored.
For those who are part of the value chain of the fashion industry, the anguish surrounding the Coronavirus is enormous and the economic and social situation is critical.
Let’s see little by little what the situation is and what perspectives are opening to get out of the crisis jointly and in solidarity.
Effects of CORONAVID-19 on the supply chain of the fashion industry
We saw the first effects on the textile and fashion industry in the supply chain, starting in China and spreading throughout Asia. This affected both the apparel sector and the supply of raw materials.
The supply chain came to a standstill, leaving retailers with difficulty forecasting the production to be supplied in the following seasons.
But there are people who have really felt the blow of the production stop. Entrepreneurs and suppliers from Asia and Southeast Asia (Vietnam, India, China, Bangladesh, Myanmar, Cambodia, etc.) face bankruptcy and chain workers face massive layoffs, famine, exclusion, and disease.
Effects in Asia and Central America
But it is not just Asia. Central America also received orders to cancel operations. In Peru, where the industry has been suffering for some years now, falls in exports reached 90% in April 2020. For their part, 40,000 establishments had to close with losses estimated at 30 million soles (US $ 8.9 million) per day, according to the Gamarra Commercial Coordination. The situation is repeated in Mexico, a country that, after constantly generating formal employment, has lost nearly 350,000 jobs during 2020.
We are talking about millions of people and their families who have lost their jobs.
The concern now is whether manufacturers will receive the agreed-upon payments and whether brands and retailers that downgrade will be able (or willing) to make advances that help keep these companies afloat in such a difficult situation.
Although the duration and ultimate severity of the pandemic remains unknown, it is clear that the fashion industry is only at the beginning of its fight.
By beating supply as well as demand, the pandemic has created a perfect storm for the industry: A highly integrated global supply chain means that companies have been under great strain trying to handle crises on multiple fronts as they the closures were enforced, halting manufacturing first in China and then Europe and the United States
Effects of Covid 19 on fashion demand
As the virus has spread to “western” countries the virus has hit the demand side. Most countries, some earlier than others, have ended up ordering mandatory quarantines and the closure of businesses of all kinds other than those of first necessity.
Indicted has temporarily closed 3,785 stores in 39 markets and its sales have fallen 24% in the first two weeks of March 2020; Primark has seen more than $ 230 million lost in March alone and H&M is concerned about excess inventory.
Loss toBig Brands
For its part, Nike has seen a $ 3.5 billion drop in the fourth quarter, with Gap already losing $ 100 million in Asia and Europe alone, before the outbreak actually hit North America, its biggest market.
And the consequence is that spending has fallen to levels never seen before. Even online sales have dropped from 15% to 25% in China, from 5% to 20% percent in Europe, and from 30% to 40% in the United States.
While these retailers worry about the decline in their income, the situation of small retailers, brands like Travis Scott Merchand businesses throughout the production chain are suffering from the fear of bankruptcy in the face of these sudden events.
We need to make the fashion industry sustainable by finding a new economic model that is more resilient to global shocks. The risks must be taken seriously by the industry. There is nothing more unsustainable than being late and ill-prepared for crises and, worst of all, not being prepared for the new context.