What is next?: Fashion and Beauty Industry post-COVID 19
Our daily lives have been severely impacted due to coronavirus pandemic. Anxiety, unemployment, the mounting cases, and death tally are the main topics in the news. Months ago, I would never have imagined an economic crisis, being isolated in a foreign country, and finishing my MBA degree without a job offer. Even worse, my dreamy fashion start-up has been financially affected like many other fashion businesses and established brands. Yet, fashion has always been fiercely competitive and despite the vulnerabilities, this is the time to innovate, embrace uncertainty with optimism, and look for new opportunities. For example, retailers are trying to turn face masks into a fashion statement.
In this article, I will discuss how resilient business leaders are currently managing the crisis by adjusting their business models, accelerating digital channels, strengthening innovation, and adapting to consumer shifting behavior. Companies are reimagining new solutions to mitigate the impact and limit suffering in the recovery phase of this dramatic outbreak. Even though fashion brands are embracing uncertainty and experimenting with a daring financial future, leading brands worldwide have stood up to inspire and support public safety. Indeed, the beauty and fashion industry is saving lives.
The economy in the fashion Industry world
Stay-at-home orders have hit the industry, from factory and store closures to events cancellation, resulting in a chaotic economic situation. At the beginning of May, Mckinsey stated in its last report The State of Fashion 2020-Coronavirus Update: "Recovery from the pandemic will coincide with a recessionary market, extended lockdowns will bring more than 80 percent of fashion players into financial distress."1 Nowadays, retails and stores should be selling spring and summer merchandise while placing orders with designers and manufacturers for the fall season. Instead, those spring looks are being returned and fall orders are being canceled by many clothing suppliers. To illustrate, The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), which represents factory owners, said: "$2.81 billion worth of work orders, made to 1,025 factories, had been canceled."2 Bangladesh is the largest exporter of garments in the world after China.
According to the Council of Fashion Designers of America (CFDA), “every designer, whether big or small, is faced with difficulties. We need to save jobs and keep people employed.”3 Thus, the CFDA joined with the National Retail Federation and the American Apparel and Footwear Association to ask for three things: "Grants to keep employees on payrolls, relief from duties and tariffs for three months, which is a temporary relief from rents by supporting the landlords.”4 The CFDA is predicting a 20% reduction in sales over the next three months, a loss of $429.9M, and 1.7 million jobs in the USA."5
Consumers behavior is shifting
Companies are affected by lower sales and losing profits. Thus, everyday retailers and brands are offering significant discounts on their online platforms to unload the high level of inventory by minimizing the stock of spring-summer collection. Although consumers are daily attracted to deals because they are online, people are prioritizing buying their essential consumer products needs. Unfortunately, they are roughly shopping for clothes and makeup.
On Instagram, for example, luxury fashion-beauty brands are offering discounts and donating a percentage of their margins to provide aid to organizations that need it the most, while others offer raffles to those consumers who buy spring/summer collection clothes or makeups. I think this marketing action plan is persuading consumers to get this new virtual bundle; I call it "shop clothes-donate strategy." For example, SummerSalt, a swimwear fashion brand is "donating $15 from every order of $125 and over to the organization No Kid Hungry’s COVID-19 efforts."6 On the other hand, small and medium businesses are asking for support, many magazines and bloggers started sharing their products. To stand out these companies started producing masks or clothes for home.
After the crisis, Fashion is likely to get worse before it gets better. “Consumers are going to spend less for the foreseeable future,”7 Willersdorf BCG’s partner and global head of luxury warned. “And shoppers are going to be far more selective with a mindset toward quality, value, and sustainability. They will be concerned about where fashion comes from, that it is ethically manufactured, and that it is as good as it can be for the environment,”8 she added. Consumers care about brands that have value; it is not transactional anymore.
Nevertheless, shopping deceleration and mindful consumers are not bad news; sustainability, environmental, and social responsibility is starting to matter to everyone. Mckinsey's Fashion Coronavirus Update article remarks: "Covid-19 is going to change a decade-long build-up of bargain shopping culture leading to a rise in anti-consumerism."9 I am convinced this new trend will slow down production and minimize fast fashion by letting consumers buy sustainable clothes. I talked more about sustainability in my previous article: "A green consciousness in the fashion industry"
Accelerating the Digitization
Social distancing is ramping up by elevating the need for digital channels more than ever. It has placed digitalization as an urgent priority across the entire fashion and beauty value chain. Because brick and mortar customer experiences are at the cusp of being endangered, fashion will need to evolve by innovating in digitalization to survive. In the new normal, fashion leaders should focus on analytics as the main tool to measure the new trends of consumer behavior.
In the case of sourcing products, retailers can better predict order quantities and varieties by using historical patterns derived from analytical tools. The integration of analytics will boost transparency across the production and operation roadmap and forge strong supplier and retail partnerships. The new normal will require collaborative innovation to drive successful digitalization.
Omnichannel may be better positioned to ensure the best customer experience on the website, so customers can still purchase and engage in an easy way. Bain & company article Luxury after Covid-19: Changed for Good? states "A 360-degree customer strategy that coordinates the plans, value propositions and actions of all functions with the overarching aim of greater customer intimacy."10
Enhancing the innovation structure
During uncertainty like we are experiencing now, innovation across the value chain will ultimately decide the beauty and fashion brands that will thrive, and those that will be bankrupt and be forgotten. Consequently, companies are preparing for a swift transformation in their value chain. Instead of seeking out new markets and future pockets of growth in the global fashion industry, companies should optimize their processes to stabilize their core businesses. According to the Council of Fashion Designers of America states “every designer, whether big or small, is faced with difficulties.”11 To cope with new restrictions, mitigate the damaging impact of the pandemic and adapt to economic and consumer shifts, companies must introduce new tools and strategies across the value chain to future-proof their business models.
Below is the new fashion-beauty model according to the new Mckinsey's Fashion article Time for change: "Innovation has been scaled up along the entire fashion value chain: from design (3D design, AI planning) to merchandising and planning (virtual sampling, video signoffs); B2B sell-in (digital selling, virtual showrooms); sourcing and supply chain (nearshoring, vendor integration) and consumer engagement (virtual shows, social selling), innovation is here to stay."12 All operations processes and technology are getting traction, leaders, and workers have demonstrated their agility by developing, producing, packaging, and supplying in this uncertain difficult time.
Fashion and Beauty brands leading remotely
With weeks of quarantine and social distancing under their belt, fashion/beauty industry leaders reflect on their often new remote work lives. Some CEOs remark on a positive side of working from home, like working faster and efficiently, listening better, and adjusting their companies to be more agile.
According to an interview with CEOs in the latest Vogue Business article, they discussed challenges and insights from remote work: "Jean-Christophe Babin, CEO of Bulgari, is no stranger to Zoom; the house has been using the tool for quite some time. “Combined with very high-res screens, the quality of an image on Zoom allows you to see jewelry pieces in detail, which is what we want in our product meetings,” says Babin. “Technology like Zoom combined with smart work isn’t necessarily a negative thing – quite the opposite. Arguably, Covid-19 will impact the way of working in the future, with a probable reduction of the number of business travels that are costly in terms of CO2, time, and money. We realize that we can work differently and equally efficiently.”13
Health and safety in Brick-and-Mortar
Many companies shutted down their brick-and-mortar stores, but some of them have restarted operations in May under State health and safety measures. For example, fitting rooms and restrooms will be closed, plexiglass at the registers will be installed, it will use hand sanitizers in tables, and will frequently clean stores. Besides, all stores will have signs to ensure shoppers follow social distancing rules.
Gap Inc. begins reopening stores this weekend. According to a recent Wall Street Journal article: "The San Francisco company is following a few other chains, including Macy’s Inc., that began inching their physical stores back to life last week. The process is complicated, because each state and locality has its own rules, and it is unclear how eager consumers are to rush back to stores, restaurants, movie theaters, and other public spaces."14
Effects of Covid-19 on Influencer Marketing
Before this pandemic, brands had strong relationships with influencers because working with them helped brands get better marketing communication strategies. Companies used influencers to generate traffic, to get brand exposure, and to sell. Yet, Fashion/beauty leaders are planning to adjust their core strategies; small and medium brands might not prioritize marketing expenses over other areas.
Fashion Brands supporting COVID-19 relief efforts
Currently, fashion and beauty brands are manufacturing hand sanitizers, masks, and gowns that are helping to save lives worldwide.
For example, "LVMH, the french luxury conglomerate that produces makeup and perfumes for brands like Christian Dior and Givenchy, has started producing hand sanitizer gel. These hand sanitizers are being donated to the Assistance Publique-Hôpitaux de Paris. Louis Vuitton is making masks to keep 30% in its factories and the remainder to donate to six Parisian hospitals, and also started producing medicals gowns."15
"L'oreal has produced 100 tons of hand sanitizer for donation to hospitals & other healthcare institutions. Besides, they created a transportable intubation box, which is keeping hospital workers safe during intubation"16 added, "Kering is supplying millions of masks to china". "Prada is donating ICU beds to Milan's hospital"."Tiffany & Co is donating $1 to Solidarity Response Fund for the World Health Organization".17
Retailers should contemplate strategic partnerships like Merger and Acquisitions (M&A). Due to the ability to make acquisitions independently while debt markets are slowed or frozen, also to secure financing in the post-crisis environment. For players with limited cash availability or challenging financial health, they should do partnerships with other players like sourcing collaborations. "We expect retail M&A activity to accelerate as the crisis stabilizes, creating opportunities for financially sound players to acquire or partner with less advantaged players".18
To sum up, brands, retailers, and suppliers will be struggling to survive, unfortunately with potentially devastating consequences for millions of fashion and beauty workers. Companies faced mounting pressure to become more customer-centric, digital, agile, and sustainable.
It is the time to embrace digital, create strategic partnerships, be customer-centric, and use innovation to satisfy consumers. I will finish this article by asking a critical question.
Will the coronavirus pandemic change the way consumers shop forever?
I think consumers will consume less, be more conscious, and responsible for looking for last-forever items. In the end, only creative companies will thrive.
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