My personal thoughts as a consumer is that this is a great time to buy non-essential goods. While toilet paper was being hoarded, the price of clothing and shoes have decreased due to the fall in demand. I bought a 100% cotton dress shirt from The Gap for $15, and a leopard print wrap dress from Banana Republic for $40. I also bought leather high-heeled wedge sandals from Geox for $60. Overall, I haven’t seen prices fall this low, so from a consumer’s perspective, consumers who are still employed and have disposable income are able to benefit from decreased demand in consumer products, which demonstrates how the pandemic has further exacerbated inequality in this society. Let’s research how this pandemic has affected the fashion industry beyond the individual, from a top-down perspective analyzing the industry as a whole.
“Disposable incomes are going to be constricted. People are going to be spending less money. That’s going to have an impact on stores.”
Armin Begic, executive director of the retail business group with research firm The NPD Group Inc, from The Globe and Mail article: Retailers fight to survive amid pandemic
From manufacturing to retail sales, the entire supply chain of the fashion industry has been severely impacted by the COVID-19 pandemic. Because of quarantine measures (to stay at home and avoid non-essential travel) as well as loss of employment for the average Canadian not working in a “essential services” sector, the average consumer has decreased their level of consumption, though not entirely of their choice. I chose to analyze the retail industry because it is one of the industries hardest hit by the pandemic and also because it is an industry that employs many Canadians, as “8 in 10 Canadian workers work in the service industry.”
Profit = Revenue – Expenses
According to François Roberge- President and owner of La Vie en Rose and Bikini Village- 266 stores across Canada closed as 3,300 out of 3,400 staff were temporarily laid off. In the United States, J. Crew, Neiman Marcus, Brooks Brothers and J.C. Penney filed for bankruptcy while Gap Inc. couldn’t pay rent on its 2,785 North American stores. Although retail has shifted almost entirely to the online world, traditional retail vendors in shopping malls that rely on foot traffic have been disproportionately affected. According to the Globe and Mail, the retail industry was one of the industries that have been most affected by the COVID-19 pandemic in March, though sales have greatly improved back to pre-coronavirus level by June, as “sales at non-essential retailers also surged higher with clothing and clothing accessories stores posting a 142.3 per cent gain in June.” However, I would caution at that optimistic statistic; I remember this article from March that details how this recession is going to be worse (in Alberta) than the Great Depression in the 1930’s.
According to the profit formula above, profit will decrease for traditional retailers because their revenue will decrease as their fixed expenses (such as rent) remain the same. This is why cashflow is an issue, because a store with $0 for revenue may still have ‘x’ amount they need to pay for rent, lighting, and salaries. And to break it down even further, shoppers have less disposable income to go shopping, and even if their income hasn’t been disrupted, the shopping experience has been negatively affected and no longer a leisurely activity if each time we leave the house becomes a potential risk for infection.
Profit = Revenue – Expenses
For the time being, shopping has transitioned mostly to the online sphere. The earlier section discussed large corporate retailers, but what about smaller fashion enterprises? For example, companies that were already operating online only prior to the pandemic have been able to cope better with the pandemic disruptions. Because they did not have a traditional retail store, they benefited from having low overhead expenses, as well having a tried-and-tested process in place to sell online. In addition, even the business practice of selling directly to consumers without selling to a wholesaler has benefited these companies.
” No more fashion shows, no more seasonal collections, no more wholesale accounts that had become unreliable (R.I.P. Barneys) or the markups required to pay for it all.”
New York Time, “Sweatpants Forever“
According to the profit formula, revenue will be down, because the conditions facing traditional retailers are the same (less consumption ), though online retailers will have more of a safety net because their expenses are lower. To me- so long as their fixed expenses are low, their cashflow is healthy (a buffer is another way I see it) , and if they have a loyal client base- these smaller-scale fashion enterprises should be doing better than a large scale retailer.
One company I can think of is called “Everlane,” an online retailer that sell directly to consumers. I’ve bought a duffle bag from them, though they are more known for high quality basics made out of cotton and silk. They market themselves as luxury minimalist fashion at a low price because they have low overhead by opting out of traditional retail. I also found it interest how they took concepts from fair trade, which is traditionally associated with coffee. They take full control of the manufacturing process and are transparent with where the goods are produced in China, how much it costs to make it, and offer fair working conditions in their factories too. Although these enterprises are smaller, their expenses are also lower by creating a sustainable business model, which means that bigger is not always better. Although some retailers may survive, all are negatively affected; although online orders have increased, social distancing results in decreased productivity, which results in less profit compared to pre-COVID times.
Thanks for reading,
Guest
