Apparel brands and retailers must use the global coronavirus crisis to take stock of their existing business models and create more stable and sustainable supply chains for the future, writes GlobalData.
Fashion retailers in key consumer markets across Europe and North America are fighting for survival. Stores are closed, sales have slumped, inventories are mounting, staff are being laid off or furloughed, executives are taking pay cuts, dividends have been suspended, and companies are taking steps to shore up their liquidity. For many, the response has also been to abandon or scale-back orders, and delay – or even cancel – payments to vendors. The knock-on consequences are factory closures and the dismissal of millions of workers in some of the poorest countries in the world.
“Global clothing supply chains have unravelled in just a few short weeks, as has the trust and goodwill between many buyers and manufacturers. Rebuilding these relationships is key if the sector is to recover, and now is the time to start thinking about how the apparel industry can reset for the future," Leonie Barrie, Apparel Analyst at GlobalData, says. “When the dust eventually settles, brands and retailers will depend on their suppliers to ramp up production. But if large numbers of factories have gone bankrupt, where will they source their goods? Onboarding new factories is a long and complicated process.
“Retailers that have treated suppliers badly may also find their support lacking when they eventually come to restock. Consumers, too, may shun brands whose focus on self-preservation is at odds with their promises of social responsibility.”
There is also external pressure from investors for companies to maintain payments to suppliers, and legislation that compels firms to consider the welfare of workers within their supply chains could be used to sue those that have not behaved responsibly.
Barrie adds: “Actions speak louder than words – and while collaboration, cooperation and strategic partnerships have been rallying calls in recent years, they’re needed now more than ever before.
“The apparel industry must start planning a way out of this crisis that can bring about positive and lasting change. Stronger and more stable relationships with supplier companies and countries, as well as cross-industry initiatives to fix flaws in the system are urgently needed now if we’re going to weather storms in the future.”