Beyond COVID-19
By Jendaya
The question on everyone’s lips is “so where do we go from here” well, McKinsey & The Business of Fashion have released their timely next collaborative instalment out of their continued report series to succinctly answer this. The State of Fashion 2020.
This is a synopsis of the main takeaways that you need to know :-
Survival Instinct:
What will you do as a brand to survive? Seeking out new markets, new products, new verticals and synergies should be the order of the day and one of the most important discussions in any management agenda from now. These will need to be bold and quickly implemented to create a much needed buoyancy on stalled balance sheets. According to the report “A two- to three-month lockdown will cause financial distress for 80 percent of European and North American fashion businesses, as volatility reduces investor confidence in a stock market facing its hardest hit since the global financial crisis of 2008.”
The expectation is that the recovery of the fashion industry will lag behind the rest of the economy.
Discount Mindset:
Shopping culture post the effects of the pandemic is likely to shift into bargain mode, and as such, the much loathed discount method in luxury will have to be employed to reach the cash-strapped average consumer. Fashion will have to tap into the sentiments of why it exists – to provide an escape from reality through the medium of apparel, lifting the sentiments of the disillusioned shopper will be the reason anyone will still buy. “In Europe and the US, more than 65 percent of consumers expect to decrease their spending on apparel, while only 40 percent expect to decrease total household spending.”
If you want to shift that inventory…you will have to discount
Digital Escalation:
Social distancing will still be the subconscious norm for billions around the world and will translate to everything we consume and how we consume it. Over the period of lockdown in response to the pandemic consumers have embraced the new normal of digital-only across entertainment, communication and shopping. It’s convenient, fast and efficient, consumer habits are harder to break than they are to build up and as such they will demand more in this space. “Unless companies scale up and strengthen their digital capabilities in the recovery phase of the crisis, they will suffer in the longer term.”
A Darwinian Shakeout – only the fit will survive:
Fashion has always been an industry where the winner takes no prisoners, with impressive and iconic conglomerates such as LVMH Group, Kering and Richemont to the more recent Capri Holdings and Tapestry. The strong divide and conquer, whilst the weak(er) must concur. According to the report “34 percent of listed fashion businesses in North America and Europe were displaying signs of financial distress before the coronavirus first broke out, and extended lockdown period will bring more than 80 percent of fashion players into financial distress”
This only means one thing: a new landscape ripe for M&A activity will emerge, and as such companies should begin to strategically envision their futures now and perform the necessary SWOT analysis to identify all the “financial leverage, divestitures, acquisition opportunities and strategic partners, increasing earnings, and creating operational and financial stability early in the [pending] recession.”
Innovation Imperative:
To innovate will no longer be a choice, it will be a must in order to survive the effects of this pandemic and for those who can read in between the lines, it is the baseline of all the aforementioned points. At every stage along the value chain from producer to consumer there will need to be a shift in order to be accomodate consumer’s new habits and the inevitably new landscape and sentiments (sustainability being at the forefront of this) created post this apocalypse of sorts. It will be a prime season for new fashion startups and a new class of influencer and fashion professional will emerge from this. Brands must listen and pay attention, otherwise they will feel instead. “Don’t let innovation stop, because this could be the window of opportunity, use this time to reinvent how you do what you do, bring consumers new alternatives, new value, and in the process even reinvent your own brand.”
Many thanks to:
Imran Amed – Founder, editor-in-chief and chief executive of The Business of Fashion
ANITA BALCHANDANI – Partner in McKinsey’s London office, and leads the Apparel, Fashion & Luxury group
ACHIM BERG – Head of McKinsey’s Global Apparel, Fashion & Luxury group
SASKIA HEDRICH – Global senior expert in McKinsey’s Apparel, Fashion & Luxury group
FELIX RÖLKENS – Senior consultant in McKinsey’s Apparel, Fashion & Luxury group
JAKOB EKELØF JENSEN – Consultant in McKinsey’s Apparel, Fashion & Luxury group
ROBB YOUNG – Global markets editor of The Business of Fashion
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