30 percent of global fashion businesses will not survive the crisis
Tuesday, May 19 2020
30 percent of the world’s biggest fashion companies, including household name brands and department stores, will not survive the pandemic crisis. The findings come from McKinsey’s updated State of Fashion Report, which said the average market capitalization of apparel, fashion, and luxury players dropped almost 40 percent between the start of January and March 24, 2020.
The impact of the virus has ricocheted across fashion’s 2.5 trillion dollar supply chain, which sees closed factories in Bangladesh, India and Vietnam, the predominant geographies where fashion’s biggest brands have their garments stitched. In Mongolia, the entire cashmere industry has come to a halt, as buyers from the West and China canceled orders. Stores in key retail markets from London to Hong Kong to New York have been closed since the crisis was officially declared a pandemic by the WHO.
As Bangladesh manufacturers cope with the loss of 3 billion dollars in payments for having produced or sourced T-shirts, shoes and designer dresses, the impact on the fundamental rights of millions of workers and the livelihood of their families in the supplier end becomes deeply apparent.
Upholding responsible practices
The Bangladesh Garments and Exporters Association (BGEA) says it is time for global businesses to uphold and honour their commitment to labour rights, social responsibility and sustainable supply chains, most importantly to honour the terms of purchasing contracts, fulfil obligations and not re-negotiate price or payment terms. As brands and stores cancel orders, responsible purchasing practices must be upheld for the entire industry to survive and recover from the crisis.
The humanitarian repercussions seem inevitable, and will far outlast the pandemic as restrictions are eased and the industry adapts to find its new normal. Gross unemployment and financial hardship is the new reality, as companies filing for bankruptcy and laying off workers is a daily occurrence. Only those in privileged locales will benefit from government support schemes.
All is not well
In the UK Peacocks canceled an order for 43,000 pairs of jeans, refusing to pay for what it calls “an essential step as, otherwise, we would be taking delivery of stock that we simply could not sell”. Farfetch on Monday sent an email to customers notifying them of their 50 percent sale. More reactive news is likely to come, as retailers and businesses fight to stay operational.
As McKinsey states, “the crisis is affecting daily lives, instilling anxiety and uncertainty in the minds of almost everyone. Indeed, consumer pessimism about the economy is widespread, with 75 percent of shoppers in Europe and the United States believing that their financial situation will be affected negatively for more than two months.” This week Japan officially entered into recession and alarm bells signallingU.S. unemployment could reach 25 percent of the working population is daunting. It is a sober warning of what is yet to come.