The coronavirus crisis has leveled retail businesses large and small. Now, it’s threatening longstanding luxury players.
American women’s wear brand Diane von Furstenberg (DVF) has reportedly laid off most of its stateside staff after its U.K. arm, DVF Studio, fell into administration last month, the equivalent of bankruptcy in the U.S.
The label was made famous by designer von Furstenberg’s iconic wrap dress silhouette, and has enjoyed household name status since the 1970s.
But in the wake of a global pandemic, the company has laid off the majority of its 400 employees at its headquarters in New York City and all but one of its stores, according to a report from The Business of Fashion. DVF will shutter all of its retail locations, including stores in California, Nevada, Florida, Washington and New York—with the exception of its flagship in the Meatpacking District.
In April, the company filed notice under the Worker Adjustment and Retraining (WARN) Act that it was planning a layoff that would impact 28 New York employees due to “unforeseeable business circumstances prompted by COVID-19.”
According to the brand’s website, its global distribution network spans 100 countries and more than 875 points of distribution, including 116 DVF-owned and partner-operated stores throughout North and South America, Europe, the Middle East, and Asia.
A representative for the company told Sourcing Journal, “DVF is in the process of restructuring due to the changing retail environment and until that process is completed we are not able to make any further comments.”
Amid these unprecedented times, the heritage brand isn’t the only one retreating from brick-and-mortar for the realm of online. According to direct-to-consumer business builder Scalefast, now is the optimal moment for brands to form strong bonds with consumers over the web due to regional restrictions on retail that still see many shops closed for business.
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Brands that have found themselves behind the curve when it comes to online strategy must work to catch up right away, Scalefast founder and chief marketing officer Olivier Schott said. Not only are consumers homebound, but they’re nervous about risking their health by getting back to the stores.
For those that are sitting on piles of unsold spring inventory, the most effective liquidation strategy is to hold sales on their own sites, Schott said. Margins will undoubtedly suffer this season due to decreased demand, but brands can recoup more on their investments by selling directly to shoppers.
Scalefast data also showed that nearly one-quarter (24 percent) of shoppers will shift their purchasing patterns permanently, even after the pandemic ends. Over the past few months, consumers have become more comfortable with e-commerce than ever before.
Nearly one-quarter (24 percent) of shoppers said that once retail restrictions lift, they’ll be more likely than they were before the pandemic to purchase directly from a brand’s website—highlighting opportunities for brands like DVF to make their mark with revamped digital experiences.
According to eMarketer’s latest forecast on U.S. retail sales last week, physical retail sales are expected to fall 14 percent this year to $4.184 trillion—and it could take up to five years for offline sales to return to pre-COVID levels.
By contrast, the market research firm adjusted its initial, pre-pandemic growth forecast for online commerce of 13 percent to 18 percent, as shoppers took to their devices to shop during store closures. E-commerce sales are expected to reach $709.8 billion in 2020, the group said.