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Amid COVID-19 Crisis, Asos and Arcadia Struggle to Maintain Business as Usual

As the COVID-19 pandemic continues to see consumer spending on non-essentials plummet, Arcadia Group and Asos are just the latest in a list of high-street retailers that have resorted to canceling orders as a coping strategy.

The companies join fellow fast-fashion firms Zara, Primark, New Look and Next in hitting the pause button in a time of massive uncertainty and shuttered storefronts. H&M, though previously embroiled in the order-cancelling imbroglio, has agreed to accept both ready goods and work-in-progress from Bangladesh factories.

According to leaked documents obtained by Drapers, Topshop parent Arcadia will be canceling all orders until further notice. It will also be extending payment terms by 30 days to 90 days, with immediate effect.

“Global retailing is facing unprecedented times with the impacts of COVID-19 unfolding and changing daily,” Arcadia wrote, explaining it was forced to close its stores last week following U.K. government intervention.

“You will appreciate that this has significantly hindered our ability to make use of any goods supplied by you and has dramatically reduced the revenue coming into our business,” it added. “As a result, we need to take action wherever possible with each of our stakeholders to preserve the future of the Arcadia business for the benefit of our employees, suppliers and customers.”

Arcadia said this was not a decision it took lightly. “We do not underestimate the impact this will have for you and your business,” it wrote. “We thank you for your understanding and cooperation at this very difficult time.”

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This isn’t the first time the struggling conglomerate, which has seen sales tumble in recent years, has put the squeeze on its suppliers. In 2018, the Dorothy Perkins and Miss Selfridge operator told its suppliers it would be paying them 2 percent less on all orders as a result of a challenging retail market. This prompted the Ethical Trading Initiative, a U.K. workers’ rights organization, to denounce the move as “appalling” and “totally unacceptable within responsible business practice.”

Human-rights groups have long pinned the glacial pace of workplace improvements and living-wage progress on brands’ often-predatory buying practices, which they say can exacerbate worker exploitation.

Arcadia did not respond immediately to a request for comment.

While Asos will still be fulfilling online orders, Drapers reports that Britain’s largest apparel e-tailer is refusing shipments for Spring 2020 from a number of third-party brands and suppliers.

“They were one of our few hopes—our situation is dire at the moment,” one unnamed supplier told Drapers. “Surely, as one of the online giants, they have a responsibility to support smaller brands as much as they can?”

At the same time, the company’s decision to keep its packed warehouses operational while allegedly refusing to enforce social distancing has drawn brickbats from staff and labor activists alike. While Prime Minister Boris Johnson ordered a three-week closure of non-essential businesses last Monday, storage and distribution facilities are classed as “essential” under national guidelines.

Still, U.K. trade union GMB warned Saturday that Asos is “playing Russian roulette with people’s lives.” Run by logistics firm XPO, Asos’s warehouse in Barnsley in South Yorkshire, England, employs up to 4,000 people, with an average of 500 working each shift, it noted.

More than 98 percent of more than 460 workers who participated in a GMB-conducted poll said they felt unsafe at the warehouse even after new safety measures were introduced last week. The issue lay with the design of the building: Narrow aisles, coupled with shared facilities such as bathrooms, a bus service and a canteen, made government mandates to maintain a six-foot distance from other people next to impossible to comply with, workers said.

“The situation at Asos is disgusting—thousands of people under one roof, not enforcing social distancing,” GMB organizer Deanne Ferguson said in a statement. “It looks exactly like a hot bed of infection—and workers are very scared.”

Asos CEO Nick Beighton, in a statement, said he refuted these allegations. “They are false and do nothing more than serve to create panic and hysteria in an already uncertain time,” he said. “In line with government guidance, and with support from the community union and Barnsley borough council, we are striking the right balance between keeping our warehouse operational, for the good of our employees and the wider economy, and maintaining the health and safety of staff, which is always our number one priority.”

Barnsley Council, which oversees the borough where the warehouse is situated, wrote Monday that it had visited the site and found all employees in compliance with social-distancing measures.

“The company is following national government advice in terms of remaining operational, protecting the welfare of their employees and constantly reviewing how additional measures can be introduced where necessary,” Steve Houghton, leader of Barnsley Council, said in a statement.

Asos was facing financial tumult even before the COVID-19 reared its head. Just last year, the e-tail giant asked suppliers for a 3 percent discount in a bid to keep finances afloat after issuing two profit warnings, which it blamed on reduced consumer confidence, a climate of widespread discounting, IT woes and unusually mild weather that hurt autumn and winter sales. Amid the pandemic, its outlook appears even bleaker: In the past 30 days, its share price has dived by 61 percent.