Lockdowns due to the COVID 19 health crisis have exposed cracks in the system. Post the pandemic, efforts to rein in global sourcing and marketing strategies will accelerate as the pandemic will unleash lasting curbs on travel, large gatherings and roving consumption. As Professor Bruno-Roland Bernard, at Institut Français de la Mode in Paris quoted in a WWD feature explains, globalisation has transformed fashion by disrupting both the supply chain and the global distribution channels. Besides, it has highlighted a number of practices that are progressively being rejected by new generations of customers.

In the same feature, consultant Maximiliano Nicolelli of Milan-based Hydra Advisory notes there will be a tendency towards more locally based activities as a consequence to support local economies, luxury going back to its roots and Europe flair, and brands marketing products in a more relevant local manner.

Fashion houses to reinvent fashion chains, focus on sustainability

Once the crisis ebbs, fashion houses are expected to reinvent their supply chains as the intensity of global trade is increasingly perceived as socially and environmentally damaging. As Bernard says, production for European fashion and luxury players will migrate to the Mediterranean regions like North Africa, Turkey and East Africa. And small family-owned fashion houses will consolidate their operations.

Bernard goes on to say, the industry could see some bottlenecks, putting already established players at a disadvantage. Nicolelli cautions there could be other downsides to localised productions like an increase in production costs or decline in manufacturing competencies.

American designers who rely on European manufacturers will be at a particular disadvantage as production in the US can be more expensive and lacks variety. Therefore, Bernand views local sourcing and production is the best way to improve a brand’s environmental footprint.

Claudia D’Arpizio, Partner at Bain & Co believes, the importance of sustainability will grow with a particular focus on the end of a product’s life cycle. Proximity to suppliers will also gain importance to manage the journey of a product. Besides recycling and resale, a network of new jobs will be created that would allow people to dismount their products and repurpose their components.

Integrating local elements in campaigns

Although some national brands might get a boost, content creation and messaging may shift, views Bernand, recommending global fashion and retail brands to build in many more local layers into their communication and campaigns.

The mother of all brand expressions – the fashion show will continue to be held by well-backed powerhouses as they are efficient to maintain and rejuvenate the brand equity, accompanied by localized interpretations. However, smaller fashion houses will go for multiple less-spectacular local shows.

Interest in local traditions to grow

Nicolleli feels, COVID-19 outbreak has accelerated people’s awareness of globalization and the interconnectivity between nationalities and countries. More customers will now support local businesses, reinforcing a sense of community. Some governments may restrict international commerce by applying higher tariffs or providing additional incentives in order to localize production. This will clearly support local factories and suppliers fostering local employment. On the other hand, it may also create supply-chain challenges and potentially have a pricing impact on final consumers.

According to D’Arpizio, the crisis has refocused the need to help local communities first and will further propel interest in local traditions and craftsmanship, particularly in China, where Gen Z especially is interested in local designers. Matt Farrell, Managing Director at Trophaeum Asset Management, predicts a trend of patriotic shopping among the wealthy.

Travel and movement interruptions

The crisis may interrupt travel and freedom to move for 12 to 18 months, believes D’Arpizio. This will reinforce local consumption in the near term. However, having a large network of stores across the world may prove problematic in as e-commerce will accelerate and more luxury firms will harmonize prices, thereby blunting the value of global shopping expeditions.

Savvy operators may leverage the crisis to renegotiate rents, or choose to operate in locations that are likely to be subdued tourist purchasing in the future. Store operators may have to focus on local customers thus reducing their need for specific type of associates and to make changes in their sales strategies, assortments and other key processes.

In their new report titled, ‘Weaving a Better Future: Rebuilding a More Sustainable Fashion Industry After COVID-19,’ Boston Consulting Group (BCG) and technology company Higg Co lay out a framework for a phased rebuilding of the fashion industry that elevates the role of social and environmental commitments within forward-looking business resiliency strategies.

The report proposes four actions to actively prepare for a changing industry:

Protecting critical assets: The report advises fashion companies to safeguard workers, employees, capital, value chain partnerships, channels and the trust and support of their customers. They should also unnecessary complexity and costs, in order to prepare for reinvestment.

Partnership with suppliers: The report recommends leaders to engage in a constructive partnership across the value chain in order to find shared solutions for protecting worker livelihood and sustaining trust.

Making sustainability central: Leaders should make sustainability central to post-pandemic decision-making. They should explore digitalization, innovative business models and end-to-end solutions – with transparency playing a central role – in order to assess and demonstrate positive environmental and social impact to stakeholders.

The 12-page report notes the unprecedented challenges that have arisen from the crisis, including its impact on the fashion and luxury industries. From March to April, sales decreased by 60 to 70 per cent in the global fashion and luxury industry – with foot traffic in retail and recreation stores declining by 44 per cent in the US, 52 per cent in Germany, 78 per cent in India and 59 per cent in Brazil.

A survey of over 500 manufacturing facilities across all main production regions conducted by the SAC and Higg Co in April reveals, 86 per cent of all facilities have been impacted by cancelled or suspended orders. As a result, 40 per cent of companies now struggle with paying employees, leading to layoffs and factory closures.

However, the survey also states that there are numerous possibilities to integrate sustainability efforts into core business strategy. Those who maintain commitments to supply chain partners, proactively keep an open dialogue and collaborate on solutions will benefit from deeper trust from consumers and value chain partners alike.

“The global crisis demonstrated the critical need for supply chain data to enable decision making and avoid fallout later,” says Jason Kibbey, CEO of Higg Co. According to him, fashion needs to be digitized to accelerate sustainability and transparency, just as it has accelerated all other dimensions of business.

The report also suggests, although the future remains unknown, retailers and brands, who are integrating their sustainability efforts more deeply into their business, are poised to come out strongly. The post-COVID environment will judge companies on how they acted during the crisis and how they prioritize sustainability and transparency once the storm has passed.

L Brands Inc has cancelled a deal that would have given private equity firm Sycamore Partners control of beleaguered lingerie chain Victoria’s Secret. Now, L Brands will operate its Bath & Body Works as a standalone public company, while attempting to turn around the lingerie brand as a separate entity. Sycamore Partners and L Brands also agreed to settle all pending litigation.

The agreement brings an abrupt end to one of the highest profile deals this year in the retail world and charts an uncertain path for a storied American brand. Victoria’s Secret had been a pioneer in mass-market lingerie, but the business has declined in recent years amid controversy and changing consumer tastes.

The February deal, in which Sycamore was poised to take a 55 per cent stake in Victoria’s Secret for about $525 million, was thrown into jeopardy in late April when Sycamore sued to terminate the transaction, arguing that Columbus, Ohio-based L Brands violated the terms of the agreement by failing to pay rent and furloughing thousands of workers amid the coronavirus pandemic. L Brands counter-sued to enforce the terms of the agreement.

Turkish Clothing Manufacturers Association Board (TGSD) has called out US brands and retailers for a rash of order cancellations, production suspensions, payment extensions and even demands to halt in-process orders. According to the trade group, some companies have requested to defer payment on orders that have already been delivered to distribution centers and stores.

TGSD has also received hundreds of messages from manufacturers and suppliers drawing attention to these issues and detailing the circumstances that their organizations are facing.

According to the board, factories are facing a massive buildup of inventory, with many large-volume orders cancelled. If brands do not step up to help their suppliers finance the minimum liabilities, their workers will suffer. While Turkish suppliers acknowledge the challenging retail landscape, as well as brands’ desire to preserve liquidity during this trying time, TGSD requested that the country’s American and European partners seek constructive solutions.

TGSD also advised that fashion businesses to preserve their long-term strategic partnerships, as the pandemic will end in due time.

Tirupur Exporters’ Association has heaved a sigh of relief as the district administration allowed units in the city to resume operations, though by strictly adhering to the safety guidelines.

The association had written to Central and state governments seeking reopening of the textile hub, so that they can send samples to clients in the US and Europe and retain export orders for spring-summer collection. Else, they could have lost the orders to countries like China, Bangladesh and Pakistan, where factories were functional. The relaxation has brought relief to the sector.

In the first phase, at least 600-700 export units will resume operations with at least 25 per cent of the workforce. TEA president has assured that the units will follow all sanitation measures and also main social distancing.

US imports of denim decreased significantly in the first three months of the year. For the year until February, US companies imported 14.32 per cent less blue jeans – of which 97 per cent are denim – at $497.08 million. The downturn was driven by China’s 63 percent drop to $55.77 million, with factories shut down as the nation swept COVID-19. In the first two months of the year, the shipments of Mexico’s largest denim supplier declined by 27.2 per cent to $ 91.98 million.

Certain suppliers in the top 10 that reported a decline in the era included Indonesia with a decline of 34.92 percent to $9.17 million and Nicaragua with decline of 2.99 percent to $13.85 million. In the period there were winners in denim import sourcing, led by Bangladesh, with an increase of 39.59 per cent to $90.13 million, and Vietnam, with an increase of 30.17 per cent to $65.25 million. This leapfrogged both countries in year-to-date importations of jeans over China. Cambodia also reported a big gain in that time, with its exports to the US skyrocketing to $29.15 million from 111.48 per cent. Pakistan, Egypt and Sri Lanka also reported small gains among the top suppliers in the region.

Pakistan Hosiery Manufacturers and Exporters Association (PHMEA) has sought zero-rated facility for the textile industry as this would help revive exports and earn much-needed foreign exchange. The government imposed a refundable 17 per cent sales tax on exports of these sectors in Budget 2019-20, which blocked their working capital and hindered growth in exports.

PHMEA demanded exclusive treatment through the de-merger of textile from the Ministry of Commerce, proposed levy of duty on export of cotton yarn (raw material for value-added textile), withdrawal of duty and taxes on purchase of locally produced raw material and zero sales tax on supply of power and gas.

It said the duration for receipt of export payments from international buyers should be increased to 365 days compared to existing 180 days as they were facing difficulties in receiving the payments under the global lockdown. The PTI government merged the Ministry of Textile with the Ministry of Commerce last year. The hosiery association requested the government to de-merge textile and make it a standalone ministry keeping in view the importance of textile industry.

All Pakistan Textile Mills Association (APTMA) says textile manufacturers in Pakistan have received new orders from different countries after the world slowly softened lockdown imposed to contain the pandemic.

These orders are a mix of new and ones which were put on hold and got temporarily suspended after the world imposed lockdown to contain the virus. Many global buyers, who had previously placed orders on hold, have now opted to take delivery. The receipt of new export orders, much earlier than expectation may, help in booking lower export losses than the initially estimated following the outbreak of COVID-19. Pakistan’s textile industries had received additional export orders and were running over installed capacity following the outbreak of the virus in China in end of December 2019.

Around 30 per cent textile industries, including value-added ones like readymade garments – have resumed production in Pakistan after the government allowed export industries to return to work under the strategy to crate balance while dealing with economic and health crises. It is, however, difficult to estimate the value of new export orders and those for which world buyers have started taking deliveries. As Pakistan was not impacted much by the Coronavirus outbreak, these orders may help Pakistan return to work earlier than estimated timelines.

Indonesian Filament and Fiber Producers Association(APSyFI) and the Indonesian Textile Association (API) have requested the government to relax tax policies as COVID-19 may force around 70 per cent of textile and textile product (TPT) companies to shut shop. At the moment, 80 per cent textile companies have halted operations temporarily while facing cash flow issues, so financial support from the government is urgently required.

One request includes penalty fee waivers from state electricity firm PLN and state gas company PT PGN for textile companies with electricity and gas consumption below the minimum threshold. The association warned that massive business closures could cause a spike in unemployment, as around 1.8 million TPT industry workers are already furloughed or laid off because of the pandemic. According to the Industry Ministry’s latest estimate, TPT industry employs around 135,000 workers annually, making up 22.5 percent of the total 600,000 workers in the industrial sector.

The association also complained about the financial sector not providing credit relaxations to textile companies, even though the Financial Services Authority (OJK) has issued regulation No.11/2020 on credit restructuring for companies impacted by the pandemic. There could be a spike in nonperforming loans from the TPT industry if the situation continues.

Cotton Association of India (CAI) has written to Prime Minister Narendra Modi to reduce the duty drawback of 5-8 per cent for export of cotton and cotton yarn. This will not only boost exports but also stabilize the cotton market and the benefit will go to India’s cotton-growing farmers and entire trade will get work. The government will earn foreign exchange if the export of cotton and cotton fiber picks up.

CAI expects to export 42 lakh cotton bales up to September 2020. So far, the association has shipped around 32 lakh bales which leave another 10 lakh bales to be shipped in the next five months from May to September. The association can easily achieve these targets if prices remain at this level.

CAI views that imports are currently not feasible because Indian prices are currently the lowest in the world while the prices across the world market at Rs 33,000-36,000 per candy. CAI had estimated import targets at 25 lakh bales of which only 12 lakh bales has happened so far.