PRELIMINARY REMARKS

Reply leverages Data and Analytics to gain insights into the development of the novel coronavirus and how it impacts society, consumers and industries. Using the Quentin Search Data tool developed by TD Reply, which aggregates data from Google Trends and Google Ads, this report provides an Industry Impact Analysis on the Fashion sector.

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This report in no way intends to distract from the fact that the outbreak of the novel coronavirus is first and foremost a human tragedy affecting hundreds of thousands of people.

As the situation is evolving rapidly, please note that this page reflects the data collected up until 20 April 2020.

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WHAT’S CURRENTLY HAPPENING?

Physical stores closed across Europe

Major EU markets are under lockdown, meaning fashion stores have been ordered to close. Those retailers without an online presence have been unable to sell.

Supply chains are interrupted

China closed down production for fashion lines in February. With borders now closed across the world, brands that rely on the global market to produce their apparel are facing a critical point.

Changes in consumer demand

Spring-Summer collections will struggle to move off the shelf as consumers delay their purchases and choose outfits more suited to a lockdown, such as loungewear.

Fashion events cancelled

Milan Fashion Week ended with an audience-free show, while others have been cancelled due to COVID-19. Fashion houses are now forced to find more innovative ways to showcase their latest collections.

SOME CONSIDERATIONs ABOUT THE FASHION WORLD

The worldwide impact of the COVID-19 crisis is particularly bad for luxury goods and the Fashion industry as a whole, since it is one of the most globalised industries on the planet.

Unlike the 2008–2009 financial crisis, there is no new collective of luxury and premium shoppers that will compensate for a drop in sales. Several growth factors that had lifted luxury and mainstream fashion brands are now cut off. In the past, fashion travel, worldwide tourism and consumption in Asian countries have contributed to a boost. These have been greatly disrupted in the wake of the present pandemic.

Now, three key points should be taken into consideration when evaluating the overall industry performance.

1

CONSUMER PERSPECTIVE

2

FASHION SYSTEM

3

LONG-TERM IMPLICATIONS

ARE PEOPLE fashionable when they work from home?

Consumer interest in Fashion has fallen by 23% in March 2020, compared to the same month in 2019. A slight recovery can be observed from April 2020 onwards.

MAKING IT A HARD-HIT INDUSTRY COMPARED TO OTHERS

EU-5 CONSUMER INTEREST FOR FASHION

Data retrieved from Quentin, TD Reply’s Search Data tool, across 5 markets (DE, ES, IT, FR and UK). Growth rate calculated as month-over-month comparing March-April 2020 against March-April 2019.

Italy, as a Fashion hub, was hit hard with consumer interest down 49% – a very substantial loss compared to the UK (-29%), Spain (-26%), the US (-24%), Germany (-22%) and France (-16%).

% CHANGE IN CONSUMER INTEREST ACROSS 6 MARKETS

-49%

-29%

-26%

-24%

-22%

-16%

The falling consumer interest signals the need for changes in product offering, sales channels and communication.

Data retrieved from Quentin, TD Reply’s Search Data tool, across 6 markets (DE; ES; IT; FR; UK; US). Change in consumer interest calculated comparing March 2020 against March 2019.

SLIPPERS VS STILETTOS

LOUNGEWARE IS IN

While most major fashion categories are struggling with the loss of consumer interest, loungewear is in the foreground. Throughout the lockdown, many brands and social media channels drew attention to casual home wear with a series of hashtags, such as #StayInPajamaContest. Some also used this moment to showcase their spring collections. One market stood out in particular: in the UK, demand for casual and loungewear jumped 433%.

LUXURY IS OUT

On the other hand, fast fashion, mainstream and luxury brands are struggling. Especially for luxury brands, the shift of interest and demand towards necessary goods are leading to a decline in revenues.

In addition, most of the development of luxury products takes place in Italy, which reinforces the downward trend in production and consumption.

Data retrieved from Quentin, TD Reply’s Search Data tool, for Fashion across 5 markets (DE, ES, IT, FR and UK). March 2020 VS March 2019.

FASHION SYSTEM UNDER STRAIN

As the Fashion industry is highly integrated, the pandemic affects both the supply and the demand side. The industry has many fronts to tackle. Imposed lockdowns halted manufacturing, first in China, then in Italy and other countries, while store lockdowns and financial uncertainties have frozen spending.

COVID-19 could serve as a catalyst for supply chain realignment.

Innovative approaches could future-proof a business model in the Fashion industry

Nearshoring production

New manufacturing hubs

Digitisation of wholesale

Live-streaming, video conferencing and online ordering

ECOMMERCE IS NOT ENOUGH

In Fashion, a large proportion of purchases are still made offline. Therefore, the closure of retail outlets has had a huge negative impact on the industry. Although major online fashion retailers have been able to keep their business running during the closure, they have been suffering from a drop in demand (-17%) since March 2020. That is due to the overall economic downturn and the decreasing number of purchase occasions (no team sports, no birthday parties, no weddings, no physical presence in schools and offices, etc.). Nevertheless, consumer interest has been slightly catching up in April. With a gradual easing of restrictions and resumption of social activities, the whole sector should follow the upwards trajectory.

CONSUMER INTEREST FOR ECOMMERCE FASHION ACROSS 5 EU COUNTRIES

Data retrieved from Quentin, TD Reply’s Search Data tool , for “Asos”, “Zalando”, “Farfetch” and “Net-A-Porter”  across 5 markets (DE, ES, IT, FR and UK). Jan 2019 - April 2020.

long-term implications for THE fashion INDUSTRY

Companies are being forced to shift gears in face of the new or changing consumer interests, which will probably stay for good. This requires a constant rethinking of communication approach and design of the entire supply chain.

Pushing for digital

  • Digital competence is essential for brands to ovecome the COVID-19 crisis.
  • Companies might also start to bring their digital marketing in-house, moving to a more agile, test-and-learn marketing model. This means brands will be able to make quicker decisions and could emerge faster from the crisis.

Heightened Consciousness

  • Even before the crisis, fashion consumers were already moving away from overly conspicuous consumption and shifting to a more balanced shopping behaviour.
  • Conscious shopping has been steadily increasing and it is expected that COVID-19 will accelerate this process. Brands need to rethink their value proposition to respond to this development.

Innovation Imperative

  • New tools and strategies are needed to cope with the effects of the crisis. Innovation is required at all stages of the value chain: from new processes for local production and planning, to reorientation of supply chains and rethinking of consumer engagement.
  • This will work especially well for brands that succeed in building their digital marketing and communication capabilities in fast decision-making cycles.