~ VOGUE BUSINESS ~

While lockdowns are beginning to ease, retailers are reopening in an uneasy, unpredictable world, with consumers cautious about spending. Financial pressures are rising, with many brands and retailers facing heavy losses. E-commerce remains a bright spot, likely to emerge as a key driver for the industry through 2020 and beyond.

Shops are reopening, factories start up again. Throughout the West, fashion stores are set to reopen, with restrictions varying widely depending on location. Most shops will reopen from 11 May in France, from 18 May in Italy and likely in June in Spain. Texas, Alabama and Ohio are among several US states where retailers have reopened. US department store operator Macy’s reopened 68 of its 775 stores on 4 May, with a second wave of reopenings expected to follow on 11 May. In Australia, department store group Myer launched pop-up click-and-collect booths at 22 of its stores, which are expected to remain otherwise closed until 11 May. Surveys suggest that consumers across the world are cautious and anxious.
Ialy’s luxury manufacturing is gradually returning to work. Valentino opened production and logistics centres in Rome, Milan and Valdagno on 4 May, implementing a series of strict safety measures. Prada Group has reopened its factory in Arezzo, Tuscany, investing in antibody and viral kits to test employees every month. Prada’s factories in Umbria, Marche and Veneto have partially reopened as well as the collection and sample-making workshops in the Milan headquarters.

Supplying the fast fashion retail sector, an estimated 850 factories have reopened in Bangladesh, although the speed of reopening has been criticised by organisations representing workers’ rights.

Financial gloom for the fashion industry increases. Companies across the West are counting the cost of prolonged lockdowns. Tapestry, which owns Coach, Kate Spade and Stuart Weitzman, reported a net loss of $677.1 million in the third quarter to 28 March, compared to a profit of $117.4 million a year earlier. Net sales tumbled 19.4 per cent to $1.07 billion.

On 4 May, J. Crew became the latest US apparel retailer to file for Chapter 11 bankruptcy protection, converting $1.65 billion of its debt into equity for its leading creditors. Neiman Marcus Group and JC Penney Co. Inc are also reported to be close to filing for bankruptcy. In the UK, fashion chains Oasis and Warehouse are closing permanently after administrators failed to find a rescuer. A fifth of UK independent retailers may not reopen after the crisis, according to a survey from Bira (British Independent Retailers Association).

E-commerce continues to gain ground. Faster adoption of e-commerce is emerging as a major industry trend for 2020 worldwide, responding to the collapse of business through physical stores. Luxury brands are fast-forwarding digital strategies, including companies that have been slow to embrace online innovation, such as Italy’s Salvatore Ferragamo, as reported by Vogue Business. The Covid-19 shutdown could be a turning point for online fashion sales in many markets, including India, also reported by Vogue Business. In China, WeChat has launched a Retail Growth Plan to support retailers operating digitally. Hong Kong retailers are experimenting with platforms such as Boutir and Shopline, which allow their sales staff to set up multiple individual online shops selling their companies’ products.

Meanwhile, cosmetics companies have been boosted by online sales during the lockdowns. Despite reporting an 11 per cent decrease in sales to $3.35 billion in Q3 2020, Estée Lauder Companies Inc surpassed Wall Street estimates for third-quarter profits, benefiting from online sales during the lockdowns.

Luxury resale prospers, fund-raising initiatives also popular. The luxury resale sector is expected to benefit from the Covid-19 crisis while wary consumers remain careful with their personal finances. Previously owned watches are a particular success for Vestiaire Collective, which recently received €59 million in fresh capital by new and existing investors, and Fashionphile. Consumers appear to be prepared to buy full-priced luxury products when a charitable component is involved, according to a new Moda Operandi report. Moda’s “Shop for a Cause” initiative, with a percentage of profits from full-price sales donated to organisations combating Covid-19, saw an increase in daily average full-price sales on-site, with 34 per cent of customers either new or returning to Moda Operandi after more than a year of inactivity.