Covid-19: Small Retailers Hanging On by a Single Thread
Panic persists in the fashion industry as small independent retailers worry about the future of their business amid Covid-19. Unable to sustain cash flow, some brands have even cancelled next season’s orders and those with existing stock are incapable of selling it as stores remain closed.
Other brands like Rebecca Minkoff and Everlane have resorted to more extreme measures by laying off a number of their staff, igniting controversy for the latter. Everlane, well-known for its sustainable and ethical values, is under fire for cutting hundreds of its employees after reassuring layoffs would not happen.
Stories like these join many others as conditions in most Western countries such as the US, France, Spain and Italy reach critical levels. At the time of writing, the number of confirmed cases in the US is over 120,000, overtaking statistics in China where the outbreak began.
E-Commerce Becomes A Necessity
On top of slowing sales from direct sales channels, small retailers are also dealing with the downturn in wholesale as many department stores and multi-brand boutiques have begun to cancel their Spring/Summer orders.
Wholesalers including department stores and multi-brand boutiques remain an important distribution channel for many young brands. However, the addition of this pandemic combined with shifting attitudes towards physical retail has many of these wholesalers on the verge of collapse.
With wholesale no longer being a viable option, small retailers have only e-commerce to rely on. But, many are not ready for this shift, Kathryn Fortunato, co-founder of an independent jewellery brand in the US said, “If our retailers close, we couldn’t support our current team just by moving that business online.”
Moving forward, fashion retailers have to be much more pragmatic if they want to stay relevant. New consumer shifts in the recovering Chinese market indicate interest in non-essential goods is wavering. With so many factors hanging in the balance, this is a critical time for them to restructure how they operate and adapt to the consumer shifts. The retailers that have adopted omnichannel strategies early on will emerge out of the crisis in a better position.
Consumers Seek Comfort
In these troubling times, comfort has become the prime focus for many consumers. Sales for sweats, robes and sleepwear have surged amid the lockdowns, Omnilytics detected over 4,000 new SKUs tagged with the keyword ‘lounge’ in this month alone – a stark contrast to December’s numbers where barely 700 new-ins were identified.
Working from home has also become a unique marketing opportunity for retailers as hashtags like #wfhfits and #wfhlife trend on social media. On March 20th, Boohoo launched a ‘work from home’ range centred around products such as comfy t-shirts, tracksuits and joggers. Among items to go viral is the ‘wash your hands’ hoodie, a cheeky nod to the virus. The hoodie which comes in two colours sold out in 24 hours.
A few weeks prior, Boohoo also ran promotions for intimates and sleepwear. Sales for this category jumped tremendously this month, capturing the majority of the retailer’s full priced sales. Overall, Boohoo’s highly tailored merchandising strategy is paying off – sell-out rates in March are up by 8% compared to February.
The demand for comfort isn’t just limited to fast fashion. In the US, Net-a-Porter also reported a 40% increase in sweatpant sales in the first week of the Covid-19 lockdown, indicating a silver lining for independent brands in the premium segment. Emerging designer brand Frankie Shop is known for its premium basics – the brand’s highly popular ‘Vanessa’ track pants priced at USD $150 have sold out twice in the past three weeks.
For retailers that still have existing inventory and new stock coming in, try to find ways to pivot your line sheets. If comfort is what consumers want, find ways to launch your casual wear products first – sub-categories like t-shirts, tracksuits and hoodies are a hot commodity in the current climate.
A Shift Towards Health
Over in China where the crisis has subsided, a sense of normalcy returns. As of March 14th, many stores began reopening in Beijing and Shanghai, with some retailers already reporting an increase in sales as ‘revenge spending’ sweeps the nation.
Among those who have benefited from this shopping phenomenon is Nike. The sportswear titan beat early estimates as Nike Inc closed the quarter with a 5% increase in revenue. Nike contributes much of this success to its swift digital strategy that was able to supplement China’s demand as stores were closed.
“One of the biggest shifts we’ve made is dialling up the strength of our digital ecosystem to help consumers maintain their physical and mental well-being while at home,” said Heidi O’Neill, the president of Nike’s Consumer and Marketplace division.
This shift towards health and fitness is incredibly evident in China where consumer sentiment has evolved as a result of the pandemic. Demand for activewear has soared as many Chinese consumers gear up to workout from home – engagement for Nike’s fitness app saw an 80% increase in the last quarter. Nike hopes the same will be mirrored in the West, where similar digital-focused strategies are being deployed for the US market.
Other activewear brands are also following Nike’s lead. Lululemon experienced a spike in sales for products like leggings and yoga mats after offering free online “sweat sessions” via their website and WeChat.
Nurturing Customer Relationships
The success of these retailers in navigating the crisis demonstrates the importance of embracing digital in all forms of consumer touchpoints. Without the physical contact of a brick-and-mortar store, retailers will need to connect with consumers on an emotional level.
Social media is more influential than ever as online engagement reaches an all-time high. Take this opportunity to diversify your communication channels and encourage human connections where possible. At this time, most people are searching for reassurance and hope, so it’s important to maintain optimism by sharing our human side. This means creating more videos, experimenting with live streams or even making quirky TikTok videos which are an internet favourite during this lockdown.
This crisis is a sobering reminder for retailers to stop viewing consumers as mere dollar signs but as people who believe and support your brand values. Sincerity and transparency must be front-of-mind when communicating with your customers.
As we weather this storm, it is time for retailers to really double down on efforts. For many, this crisis is a test of endurance. Retailers that survive this will undoubtedly come out stronger than ever and even more prepared for whatever the future holds.
Find out more on how global brands and other market leaders are responding to this crisis in Omnilytics’s latest report, Fashion Retail and the Covid-19 Crisis.
You might also like
Top Fashion Retailers in Southeast Asia
As markets around the world continue to be impacted by the pandemic, Southeast Asia thrives. Sales have plummeted in the UK and US, but international sales increased by significant margins for Asos. Meanwhile, e-commerce in the US got a major boost from cross-border trade, lifted by 42% from last year. In other words, the emerging […]
Back-to-School Retail Fizzles Under Pandemic Pressure
As one of the biggest shopping periods in fashion, back-to-school harboured hopes of an economic boost for many retailers. Last year, back-to-school saw consumer spending surpass $80 billion, second only to the holiday season. But uncertainties in the new schooling calendar and weak consumer spending will likely result in a more muted affair than retailers […]
Holiday Retail 2020: Predictions and Demand-driven Strategies with the Parker Avery Group
This year’s holiday retail will be unlike any the industry has ever experienced. As the biggest annual shopping period, the holiday season accounts for 20% of retail sales each year. But for this year, after a tumultuous period of economic downturn, a boost in consumer spending is highly anticipated. That said, retailers have to exercise […]
The Evolution of The Luxury Fashion Market
The luxury fashion market is in for a demographic transformation. As consumer behaviours are shifting towards a more digital and experiential trend, luxury brands are realising the need to reinvent themselves. Just a mere decade ago, the premium market was dominated by baby boomers and Gen X – those born after the World War through […]
Fashion’s New World Order Powered by Tech
The pandemic has had repercussions far beyond retailers’ revenues. During the lockdown, nearly every facet of the fashion industry was brought to a standstill. From manufacturing to media, social distancing threw a major wrench in fashion’s roadmap. Unlike other industries that have been quick to adopt tech innovation, fashion had grown accustomed to the conventional […]
How to Remove the Guesswork from Trend Forecasting
Before Covid-19 upended the world, the industry often resorted to the same fashion trend analysis methods to gauge market demand. Trend forecasting services like WGSN are typically used to guide the fashion design and buying processes, leading to the homogenised state of the fashion landscape. There are also other common methods used, such as… Historical […]