hnnhcronin Navigating the fashion industry in the world where influencers are the new models and authentic, easy-to-use e-commerce websites and pop-up shops are the new flagship stores has been tumultuous enough for major brands. With the revenue damaging COVID-19, the future of retail looks bleak and uncertain. This chaos causes major questions to arise: will athleisure and loungewear thrive after months of adapting to a life of comfort? Or will there be a resurgence of formal wear after going so long without dressing up? Will the convenience of e-commerce reign strong? Or will consumers become nostalgic for the in-person brick and mortar experience? One thing is for sure: the impending recession and related decline in consumer sentiment will have a long term impact on the profit, strategies, and even trends of retailers, as most companies have a large buildup of unsold inventory.
Who are the winners? Thus far, Lululemon sales and stock price have soared, likely due to the demand for comfortable apparel to wear while working and exercising from home. Similarly, athletic brand NOBULL has seen a 50% increase in online sales compared to this month last year. Many people are taking this time as an opportunity to exercise, either outside, streaming workout classes, or through Peloton and similar machines. Even those who haven’t increased their exercise regimen during shelter-in-place order, comfort is no doubt a priority of the quarantine. The only question is whether or not this penchant for comfort will last once restaurants, bars, and events begin to open
Consumers have shown much more positive sentiment towards brands who have adjusted their marketing, corporate social responsibility, and pricing efforts to align with the context of this global pandemic. Major brands have dedicated their resources, both monetary and nonmonetary, towards relief efforts. For example, Ralph Lauren donated $10 Million to the World Health Organization COVID-19 Solidarity Response Fund, the Emergency Assistance Foundation, and the Ralph Lauren Pink Pony Fund focused on raising money for cancer. Prada, on the other hand, is focusing its manufacturing facilities on the development of 110,000 masks from excess fabrics to deliver to hospitals. In yet another manner, French conglomerate LVMH is using its facilities normally dedicated to the production of perfume and makeup to produce hydroalcoholic gel to distribute to French hospitals and health facilities. All of these brands are showing major dedication to their country, culture, and customer base, which should serve them well in the long run. Additionally, the companies who are smart with managing and keeping their cash and with reigning in inventory purchases will experience less financial strain once the economy begins to reopen.
The Losers? The retail industry as a whole is hurt in this crisis, with new bankruptcy filings nearly every day, ranging from J. Crew to Neiman Marcus, shrinking EBITDA, and major companies unable to pay their rents, vendors, or interest payments. Brands that were struggling with sales decline and inability to connect with young, digital savvy customers as well as those with a high cost structure are the ones who are the most hurt during this crisis. The credit ratings continue to decline and the future does not look good. Additionally, as with most recessions, luxury brands are especially subject to cyclical fluctuations, and their steeply slowing revenues are proof of this phenomenon.
Even though the context favors increased engagement of digitally native brands or those with a very large social media presence, this larger amount of time spent browsing through the social media pages or websites of brands is not leading to an increase in conversion. Across all channels, customers are reducing discretionary spending. Additionally, with attempting to maintain a safe distance between workers and encouragement to stay home if feeling sick, the warehouses and logistics centers may be slower than usual.
Until consumers feel more comfortable expending money on nonessential products, there is no telling which fashion trends, preferred method of shopping, and companies will prevail.
