Highlights – The State of Fashion 2020 Coronavirus Update

Olá, tudo bem?? como está sendo seu tempo aí de quarentena?

Hoje trouxe para você alguns highlights do relatório anual “The State of Fashion”, feito pela McKinsey e o Business of Fashion. Normalmente eles lançam esse report no final de cada ano, comentando sobre o seguinte e, como estando passando por esse momento, fizeram o “Coronavirus Update”. Os conteúdos estão em inglês, caso sinta dificuldade para interpretação, entre em contato que vou te ajudar!

“The average market capitalisation of apparel, fashion and luxury players dropped almost 40 percent between the start of January and March 24, 2020  — a much steeper decline than that of the overall stock market.

We estimate that revenues for the global fashion industry (apparel and footwear sectors) will contract by 27 to 30 percent in 2020 year-on-year, although the industry could regain positive growth of 2 to 4 percent in 2021.

For the personal luxury goods industry (luxury fashion, luxury accessories, luxury watches, fine jewellery and high-end beauty), we estimate a global revenue contraction of 35 to 39 percent in 2020 year-on-year, but positive growth of 1 to 4 percent in 2021.

If stores remain closed for two months, McKinsey analysis approximates that 80 percent of publicly listed fashion companies in Europe and North America will be in financial distress. 

Even online sales have declined 5 to 20 percent across Europe, 30 to 40 percent in the US and 15 to 25 percent in China

Once the dust settles on the immediate crisis, fashion will face a recessionary market and an industry landscape still undergoing dramatic transformation. We expect a period of recovery to be characterised by a continued lull in spending and a decrease in demand across channels. As noted in our previous reports with themes on “Getting Woke,” “Radical Transparency” and “Sustainability First,” the consumer mindset was already showing signs of shifting in certain directions before the pandemic.

The coronavirus also presents fashion with a chance to reset and completely reshape the industry’s value chain — not to mention an opportunity to reassess the values by which we measure our actions.

Now, the resulting “quarantine of consumption” could accelerate some of these consumer shifts, such as a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action. Meanwhile some of the shifts we will witness in the fashion system such as the digital step change, in-season retail, seasonless design and the decline of wholesale are mostly an acceleration of the inevitable — things that would have happened further down the road if the pandemic had not helped them gain speed and urgency now.

Discount mindset – 56% Percentage of consumers who said special promotions were an important factor when shopping for clothes in the 4 weeks leading up to 29 March 2020

Darwinian Shakeout – 80% Percentage of fashion companies who would be in distress after more than 2 months of store closures

Innovation Imperative – 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. Fashion players must harness these innovations and scale up those that work in order to make radical and enduring changes to their organisations — and to the wider industry — after the dust settles.


Recovery from the pandemic will coincide with a recessionary market, compelling fashion players to ramp up resilience planning and adapt their operating models. Companies surviving the immediate crisis will have made bold and rapid interventions to stabilise their core business before seeking out new markets, strategic opportunities and future pockets of growth in a global fashion industry undergoing dramatic transformation.

[…]fashion may face a harder time than discretionary goods overall: more than 70 percent of European and US consumers expect to cut back spending on apparel compared to a 40 to 50 percent drop in global discretionary spending.

As the dust settles, the luxury sector may suffer more than other segments. This is due to the luxury sector’s reliance on travel retail (20 to 30 percent of industry revenue is generated from luxury purchases made outside consumers’ home countries),10 in addition to lower levels of online presence and high dependency on department stores and experiential in-store retail. For example, in March LVMH announced a 20 percent drop in quarterly revenue as a result of the Covid-19 outbreak.11 While the extent of the damage remains unclear, 2020 is already shaping up to be “the worst year in the history of modern luxury,”12 said Luca Solca, investment research analyst at Bernstein.

As we have seen in China, the re-opening of physical retail does not mean business returns back to “normal.” When 90 percent of apparel stores re-opened in China, footfall and purchases were still 50 to 60 percent below pre-crisis levels. Furthermore, each country will see varying recovery phases depending on their healthcare systems, financial resources and immediacy of response to the outbreak. For fashion, a rapid return of consumer confidence is especially important to restore the value chain.


As deep discounting plagues retailers for the remainder of 2020, a decade-long build-up of bargain shopping culture will be exacerbated by a rise in anti- consumerism, a glut in inventory and cash-strapped consumers looking to trade down or turn to off-price channels. To reach increasingly frugal and disillusioned consumers, brands must find inventive ways to regain value and rethink their broader business mission.

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 (see Exhibit 2).21 What’s more, 56 percent of consumers state that their main reason for purchasing clothing during the crisis was special promotions.22

Companies will turn to steep discounting to clear inventory for the rest of the year at a minimum, with a risk that “the contagion of deep discounting could spread as quickly as the disease”24 throughout the industry, reminiscent of the discounting culture that took hold during the 2008 financial crisis and has dogged the industry ever since.

Seasonless stock like intimates is less exposed and can be repurposed later in the year, but most mass-market players will be left with little alternative to slashing prices, with other inventory-reduction plays, such as controversial stock incineration, no longer feasible in times of heightened transparency and sustainability-conscious consumers.

Even after the dust settles, financial turmoil stemming from the crisis will continue. McKinsey and Oxford Economics analysis shows that, even in the most positive economic recovery scenario, GDP will only return to pre-crisis levels by the end of 2020, or even the beginning of 2021.  As consumer spending in most advanced economies accounts for roughly two-thirds of the economy, and about half of that is discretionary spend, fashion companies will be left grappling with price deflation and a sharp drop in demand across the board. Evidence from previous crisis shows that it may take up to two years to fully restore consumer confidence,  with early numbers from China showing that apparel sales were still down by 50 to 60 percent in the first month after stores re-opened.

In the luxury segment, we expect consumers to return more quickly to paying full price for quality, timeless goods, as was the case after the 2008-2009 financial crisis. For luxury brands, however, the discounting challenge is exacerbated by the need to preserve reputation and image, making it crucial to avoid steep discounting, or at least discount in a more controlled way through off-price channels. Brands will need to find innovative ways to work with wholesalers and e-tailers — which might even include inventory swaps to prevent them from discounting their products.29 (Multi-brand retailer Net-a-Porter had 30 percent of its assortment on markdown as of March 2020, compared to only 1 percent in 2019).30 

The pandemic will bring values around sustainability into sharp focus, intensifying discussions and further polarising views around materialism, over-consumption and irresponsible business practices.

The focus on sustainability will be especially prominent for Gen-Z and Millennial shoppers, whose concerns for the environment were already heightened pre-crisis. As we stated in The State of Fashion 2019 report trend “Getting Woke,” consumers will make or break brands based on trust — a trend that is now further intensified.

This may signal the end of “extreme consumerism” for some consumers who reject the idea of buying goods in large volumes. According to a McKinsey survey, 15 percent of consumers in the US and Europe expect to buy more ecologically and socially sustainable clothing. Brands that are able to reorient their missions and business models in more sustainable ways will be able to cater to a more captive audience than ever before.

Fashion players may also turn to more innovative ways to reduce stock and reinfuse value into their products, such as accelerating nascent sustainability trends. For many players, repurposing existing stock for new seasons will be a more viable option than recycling or upcycling with fabric additions or extractions. Other opportunities include personalisation, customer experience and a re-evaluation of the company’s fashion calendar, such as moving monthly drops into later seasons.

To improve their long-term outlook, brands will need to tailor future discounting strategies by aligning promotions to their various channels and putting in place a revised product calendar to reflect fashion’s “new normal.” They will also need to reinfuse value to make it worthwhile for consumers to shop at full price. The solution is not just about reducing overstock but gaining back the trust and enthusiasm of cash-strapped consumers — and that cannot be achieved by discounting alone.

People will acclimate to the wider digitisation of consumer journeys as digital content creation becomes their primary mode of brand interaction.  – Influenciadores 

As the crisis also pushes 13 percent of European consumers to browse online e-tailers for the first time, 40 brands should take the opportunity to become not just more digitally adept, but to become digital frontrunners.

Though much about the pandemic’s duration and trajectory remains uncertain, businesses can expect that recovery will be a gradual process as society adjusts to the new normal, consumers continue to avoid large crowds and social distancing rules remain in force. Even after stores begin to re-open, fashion’s digital step change demands that companies change their mindset and begin to operate like pure digital players: rather than asking what benefits online can offer offline channels, players should ask how their brick-and-mortar presence can support e-commerce sales. Digital plans should be prioritised when it comes to talent, time, allocated inventory and future investments, and marketing spend should be shifted to digital channels, with ROI precisely tracked.

The strongest players will quickly scale up and strengthen their digital capabilities, which will allow them to capitalise on future opportunities and protect their businesses from risks. Investing more in existing digital capabilities — such as improving the customer journey and the broader customer experience — should happen alongside pioneering new ways of engaging with consumers online. Livestreaming services, omnichannel inventory capabilities and social commerce platforms are just the tip of the iceberg.

For consumers, the rapid and recent pivot to digital will continue long after the immediate crisis, but for most fashion players, it will come at a cost. Since digital channels can be less profitable than physical retail, players need to establish a balanced model that prioritises digital growth in an integrated way with cutting-edge customer experience. It is important to remember that digital channels are not a “silver bullet” to compensate for the shortfall in revenue from stores — in making this switch, some businesses may become smaller, at least for a while, which will open up the need to revisit their operating model as they adjust to the new reality.”

Fonte: “The State of Fashion 2020 Coronavirus Update”

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