Fashion’s Time for Change: Adapting to Lessons Learned from COVID-19
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Business
Written by Ronen Lazar, CEO of INTURN
An unfortunate reality exists within the pandemic’s impact on the fashion industry. The economic fallout from store closings, supply chain disruptions and mismanaged inventory has revealed glaring structural deficiencies in fashion that require strategic change. The next six months will be more critical than the last six months for brands and retailers who fail to adapt. Now more than ever, companies must employ a proactive approach to fostering economic recovery by applying lessons learned this year. Alongside e-commerce, these three strategies will empower brands to successfully navigate an uncertain industry environment.
Alleviate Excess Inventory Challenges
Unprecedented high volumes of excess inventory have strained fashion’s supply chains and profit margins. Most brands used to rely on wholesale retailers to sell their products. However, the logistics complexities, store closings, consumers’ reluctance to shop in public and changes in spending habits caused by the pandemic have made their former model ineffective. A number of department stores have filed for bankruptcies and cancelled upcoming seasonal orders, and in turn, brands continue to suffer the financial consequences.
Now is the time for companies to focus on how they can utilize digital innovation for both limiting and managing excess inventory to preserve profits. Leveraging advanced forecasting technology can help brands navigate demand volatility more effectively to reduce their excess inventory levels. Meanwhile, using an enterprise software solution that optimizes, streamlines and digitally manages their excess inventory will help maximize sales to the off-price and third-party markets.
Develop Resilient Supply Chains
Major disruptions to fashion supply chains have proven to be extremely costly. The apparel and footwear sectors are estimated to see a 27 to 30 percent decline in revenue by the end of 2020 from supply chain anomalies and cuts in sourcing volumes that transpired in the beginning of the pandemic. The fall and winter months may cause a resurgence of the virus in certain geographical locations that will lead to more supply chain disruptions. In response, fashion distributors and brands will need to emphasize:
• Increasing supply chain flexibility to remain agile amid drastic demand swings for a quick and effective response
• Adapting a supplier-first approach that ensures effective collaboration and mitigates financial risks
• Digitizing supply chain processes to enhance operational efficiency and reduce labor costs
• Developing a contingency plan that ensures business goes on despite potentially needing to halt production in certain areas
Prioritize Sustainability
Climate change’s damaging effects are already upon us. Sustainability is vital, especially in the global fashion market, where excess inventory constantly ends up in landfills producing greenhouse gasses. Lacking focus on sustainability can drastically damage a brand’s earnings potential and reputation. Millennials and Gen Zers combine to represent a large pool of consumer spending, and their customer loyalty (along with interest in employment opportunities) is heavily influenced by a commitment to eco-friendly initiatives. Consumer concerns about sustainable fashion have only increased during the pandemic -- reflectant in a July 2020 McKinsey & Company survey that reported 60 percent of its respondents are going out of their way to purchase eco-friendly products.
Despite fashion’s current situation, there’s still a silver lining for the future. As hindsight is 2020, lessons learned from this year can guide how brands and retailers approach economic recovery in a post-pandemic environment. After all, a mistake is only a mistake if you fail to learn from it.