The COVID-19 impact on the fashion industry and the road ahead

The COVID-19 pandemic has taken a heavy toll on the global fashion industry including some iconic fashion brands. From big fashion retailers to small apparel makers, all have been adversely impacted as reduced consumer spending on non-essentials resulted in decreased demand and margins and forced many brands to either shut shop or declare bankruptcy. US retailers are on track to close c.25,000 stores this year and around 45 US retail companies have filed for bankruptcy so far this year. Brands including Brooks Brothers, Tailored Brands, Lucky Brand, JC Penny and ALDO have filed for bankruptcy in the wake of the pandemic. Retail M&A investments increased 71% in 1H20 from 1H19, with the investments focused on reconfiguring supply chains and adapting to the burgeoninge-commerce and omni-channel operations. Large shifts in consumer behaviour and preferences are expected to lead to some permanent changes in the industry. In this article, we discuss what brands can do to survive the pandemic and the opportunities that will unfold in the coming months.

Key Takeaways

1. The global clothing and clothing accessories stores market is expected to shrink to
  USD1,245bn in 2020 from USD1,257bn in 2019, declining at a CAGR of 1%, mainly
  due to the pandemic-induced economic slowdown. The industry’s revenue could plunge
  more than 33% in 2020.
2. Increasing margin pressure has severely impacted big retailers and forced them
  to restructure their business models.
3. Some well-known fashion names filed for bankruptcy this year due to accumulated
  liabilities, lower consumer demand, lower footfall and negative growth rates. A silver
  lining is acquisitions or mergers/partnerships that have increased significantly in 2020.
  Companies strong enough to weather this crisis may consider acquiring undervalued companies.

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