Order cancellations to affect fashion companies in Q3 and beyond
Don-Alvin Adegeest| Thursday, August 06 2020
The outlook for the fashion industry and its supply chains in a post-lockdown world continue to be challenged according to data from the annual U.S. Fashion Industry Association (USFIA) Benchmarking Survey.
In association with Dr. Sheng Lu, Associate Professor Department of Fashion & Apparel Studies University of Delaware, one of the questions in the survey every year asks brands and retailers what they think about the five-year outlook for the fashion industry. 2020 sees the lowest level of confidence in the five year outlook, and the highest number of respondents who are pessimistic.
In the survey 100 percent of fashion industry executives reported postponing or canceling apparel sourcing orders this year due to the pandemic, which saw leaders from 25 fashion retailers, importers and wholesalers participate in the report.
Fashion companies from Primark to H&M have at times delayed and/or canceled orders because of low demand, which in turn have negatively affected suppliers in regions such as Bangladesh and India.
“Respondents seem to be more ‘careful’ about canceling orders coming from Vietnam,” USFIA said, due to many regarding it as the “next China” for apparel sourcing. Some companies, notably H&M, have committed to paying their suppliers for orders already in production.
Business difficulties and industry challenges
Covid-19 has caused severe supply chain disruptions to U.S. fashion companies. The disruptions come from multiple aspects, ranging from a labour shortage, shortages of textile raw materials, and a substantial cost increase in shipping and logistics.
Covid-19 has resulted in a widespread sales decline and order cancellation among U.S. fashion companies. Almost all respondents (96 percent) expect their companies’ sales revenue to decrease in 2020.
Those who feel optimistic or somewhat optimistic about the next five years swiftly fell from 65.3 percent in 2019 to a new low of 57.9 percent. In comparison, nearly one-third of respondents hold a pessimistic or somewhat pessimistic view about the future of the fashion industry, the highest since the survey launched in 2014.
The “increasing production and sourcing cost” is ranked as the 4th top business challenge facing respondents in 2020. Notably, for the second year in a row, respondents say “shipping and logistics” is their top cost concern in 2020. Further, as high as 90 percent of respondents explicitly say, the U.S. Section 301 action against China has increased their company’s sourcing cost in 2020, up from 63 percent last year.
Companies are not ignoring sustainability, despite hardship
Over 70 percent of respondents this year say they plan to allocate more resources to the area of sustainability and social compliance through 2022, which is even higher than 63 percent than in 2019.
The mission of the USFIA is to support the fashion industry with analysis, education and training, and advocate for trade policy that supports Fashion Made Possible with Global Trade.
This benchmarking study was based on a survey of nearly 25 executives at the leading U.S. fashion companies from April to June 2020. The study incorporates a mix of respondents representing various types of businesses in the U.S. fashion industry. Approximately 63 percent of respondents are self-identified retailers, 37 percent self-identified brands, 63 percent self-identified importers/wholesalers, and 11 percent were service providers, including sourcing agents.
For more information visit www.usfashionindustry.com
Image and article source USFIA