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Why This Fashion CEO Says COVID-19 Could Benefit DTCs

The coronavirus has effectively pressed the “pause” button on the fashion industry’s retail and manufacturing operations, but behind the scenes, industry insiders are churning with ideas and strategies for the sector’s eventual re-emergence.

According to Zahra Bahari, CEO of full-service brand development and manufacturing group The Powell Companies Real, those tactics will rely on a heavy acceleration toward digitization and virtualization—from point-of-sale through supply chain processes.

“Selling and retail has been trending toward digital sales anyway, and brick-and-mortar was becoming a place for experiences rather than giant warehouses to house a bunch of clothes,” Bahari said.

Post-pandemic, she said, the migration toward e-commerce will continue, and consumer appetites for trying on clothing in stores might wane. “It’s a bit unsanitary, thinking about that after COVID,” she said. Bahari predicted that virtual and augmented reality experiences to simulate the try-on process could prove prescient.

There will have to be shifts and changes for brand operators and retailers, too, like a new reliance on virtual showrooms for buyers in the wake of canceled trade events and fashion shows. Virtual samples could take the place of physical ones, reducing the need for the costly and potentially risky swapping of mock-ups.

“No one was accelerating bringing on these platforms until the crisis, though they existed long before,” Bahari said, adding that few brands wanted to serve as guinea pigs in an untested digital experiment.

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But the rise of a pandemic that has kept consumers out of stores and workers away from their posts has highlighted the need for contingency plans.

“Now there’s openness, but it’s slower than it needs to be,” she said, adding that the industry must make the migration toward digitally native processes as a herd so that all can benefit.

Unfortunately, though, the situation has underscored some of the weak links in the chain binding retailers, brands and their supply chain partners.

As mandatory store closures took effect and consumers guarded their wallets against impending economic turbulence, retailers sensing a shift in the winds began canceling orders from brands.

The domino effect rippled through the supply chain, resulting in mass furloughs and layoffs throughout.

“We’re starting to see the fragility of the meaning behind a purchase order,” Bahari said. “It used to be a coveted piece of paper” that guaranteed a secure deal, she said, “but in second’s notice, that order could now be cancelled” with orders and dollars hanging in the balance.

The Powell Cos. have brought in strong legal and finance partners to navigate the rough waters and help hold partners to their commitments.

“There will be a new way of financing the relationships,” Bahari said. “The P.O. doesn’t have the same clout as it once did, and there has to be a whole shift in the financing of the supply chain.”

Brands may ask retailers for more assurances that their products will be needed, and in turn, factories may ask brands for the same assurances.

The Powell Cos.’ manufacturing partners are also looking into revamping processes to guard against future cancellations. “We’re looking at smaller production runs to make sure we don’t risk their support, and their operations, should this ever happen again,” Bahari said.

When asked whether Plan B could become the status quo, Bahari said, “Normal is not going to be in the dictionary anymore.”

“My best hope is that these new strategies are going to be permanent,” she added. “It will take some time for the new measures to take a shape that the industry follows.”

Direct-to-consumer brands that market their own products and fulfill their own orders have cut out one critical pain point in the traditional retail model: fluctuating relationships with wholesalers.

The digitally native upstarts that The Powell Cos. services have seen upticks in sales where warehouses are able to fulfill orders, Bahari said. “They have not seen the same level of decline as the brands that were solely reliant on wholesale.”

As brands across the spectrum work to quickly beef up their online operations in light of the crisis, retailers should be worried about their place in the equation, she added.

“A lot of brands will say, ‘I’ve had it with the retailers and the way orders can be canceled, we’ll take the investment and put it into our DTC and marketing,’” Bahari said. At one point, the cost of acquiring customers outpaced the cost of selling into retailers, “but now it’s becoming a much better bet,” she said.

If brands give up on wholesale altogether, though, it could be to everyone’s detriment. Bahari pointed to as a valuable platform for small, independent brands to find their footing among a valuable network of loyal shoppers.

“Now, with those brands venturing out on their own, they’re missing out on the giant footprint that a big retailer could bring to them,” she said.

Bahari hopes that retailers will offer brands some assurances about the orders to which they commit. Their survival, after all, depends on it.

“I’m one of the few that thinks department stores can bounce back,” Bahari said, despite the retail bloodbath wiping out the once ubiquitous mall anchors.

The stores now undergoing painful restructuring efforts were already on the path toward such a fate, she said. In fact, the pandemic has made it easier for those businesses to refinance.

Those that survive will need to position themselves for success, she added, prioritizing digital sales and creating unmissable retail experiences that lure long-homebound consumers from their couches.

They will have to rethink product categories, homing in on items that are attractive to shell-shocked consumers. There will be a much higher interest in practical, versatile, high-quality products that can serve a wide range of uses and stand the test of time.

“There will be a thoughtfulness that has to go into design, rather than just being creative,” Bahari said. Consumers will be much more focused on “socially responsible product and on brand authenticity.”

“My general advice is not to pivot your design process because of what’s going on in the world,” but, Bahari said, these are extenuating circumstances. “There has to be a much more sustainable way of designing and producing your brand. Every design should have a multi-purpose function to it.”

In the current retail environment, independent specialty shops have seen favorable results, connecting with consumers through personalized touches and focused assortments.

Those that have product categories that are particularly relevant to today’s atmosphere, like athleisure and children’s clothing, are in a groove, she said. Big-box retailers that carry consumer essentials as well as apparel have demonstrated an ability to sell fashion effectively, too.

“The ones in the middle that don’t stand for either/or will have a harder time,” Bahari said, noting that the pandemic could be the nail in fast fashion’s coffin.

“All data and research shows that brands will have a much better case for making the connection with their consumer base if they had that trust to begin with,” she said. Those with a sustainable basis or a reputation for being socially conscious are more firmly rooted, at this point, than their peers.

“The ones that were a bit behind on these aspects will have a bigger challenge proving themselves to the consumer,” she said. “Consumers are smarter than ever before, and have had a lot of time to reflect.”