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Will COVID-19 Have a Rana Plaza-Like Impact on Fashion?

COVID-19 has disrupted the global fashion industry, sparking canceled orders, closed stores and factories, and changes in consumer behavior. But beyond the short-term impacts, the virus has the potential to leave a lasting mark.

It wouldn’t be the first time a major event had a longstanding impact on the business. For instance, the 2013 collapse of Rana Plaza ushered in a greater focus on corporate social responsibility and the welfare of workers within the apparel industry.

Earlier, the end of the three-decade-long Multifiber Arrangement in 2005 changed the makeup of the supply chain map by removing limits on textile sourcing from developing nations.

Here, five industry insiders weigh in on whether COVID-19 will lead to lasting changes, transforming the supply chain to be more digital, localized and collaborative.

Dr. Alexander Ellebrecht, manager business development, ChainPoint:

The short-term consequences are huge. Many companies have problems to survive and there is a huge problem regarding unemployment and low prices. This creates social problems, which will be discussed. For example, in Germany these discussions actually take place at government. We expect that brands and retailers will analyze their chains and review risks for potential disruptions.

I expect that social responsibility issues for the own supply chain will become more important for exports into certain markets like the European Union.

There will be an increased demand for IT solutions that help to more efficiently monitor the supply chains; we created a standard solution to help brands and retailers.

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Antje von Dewitz, CEO, Vaude:

It became even more evident that there is an enormous overproduction in the textile industry. Worldwide production of clothing had doubled in the last 20 years.

Parallel to this, the price level for (fast) fashion has also fallen dramatically. During corona, a lot of people got aware that they already have everything they need. Many people became more critical in their buying behavior concerning clothing and fashion, so we do expect a higher awareness among consumers for the future.

In our view, there is a chance for the collection cycles to slow down again and for clothing to regain more value in the long term.

Benjamin Eberle, CEO, Topo Solutions:

The Covid-19 crisis will most certainly be a turning point for the fashion business, and we are already seeing it unfold.

On the demand side, retail sales are undergoing a massive shift to go online, a trend that is strongly accelerated by the pandemic. Companies need to redefine and boost their distribution channels and overhaul their marketing strategy in order to survive.

On the operations and supply side, we observe a strong trend to increase efficiency in the form of digitally integrating supply chains, enhancing operational systems and automate back-office workflows in order to focus on value creation. Many companies have started to embrace remote working as well, which requires the right digital tools.

A challenge many fashion companies are facing at this moment is that many are in survival mode and are occupied with cashflow management and refinancing rather than with anything else and might not be able to keep up as a result.

In short, the trend to digitize and optimize all aspects of the supply chain up to the final mile has gotten a massive boost and many companies’ survival will depend on how fast they are able to adapt. Technology will be key in this digital shift along the entire value and supply chain of brands and retailers. Digital tools will empower teams to work remotely and unlock the potential of true collaboration among all stakeholders.

Stephen Kerns, president, Schoeller North America:

While consumers are still passionate about shopping and seemingly excited about visiting retailers again, versatility in apparel and footwear will be more important now more than ever. Instead of making purchases for a special occasion, upcoming work travel—an opportunity to ‘unveil’ a new, special item—there will likely be more thoughtful sensitivity around conspicuous or frivolous consumption. People will take more time to look at fashion investments along the lines of whether or not it will have staying power in their closets and be perceived as a smart, considerate choice.

Angelo Ng, chief merchant officer, Wolverine Worldwide:

COVID-19 has evolved beyond a pandemic to become an inflection point that is accelerating change in the fashion industry across a variety of fronts, including supply chains, sustainability and digitization.

As a result of COVID-19, global supply chains are being pressured by economic challenges and international travel bans. COVID-19 can impact long and complicated supply chains in particular and may accelerate the already existing trend of local-for-local and the need to lean into local sourcing more heavily than ever.

Manufacturing and inventory management are being impacted already as brands, retailers and manufacturers are collectively navigating through the challenges posed by cancellations, late payments and soon-to-be deadstock.

With increased global awareness, consumers are now more conscious of where goods are sourced from and produced. Retailers and brands will therefore need to be more transparent about their global supply chains as this will start to have a larger impact on consumer purchasing decisions.

I foresee the need for a more agile supply chain with decisions being postponed as long as possible and the industry trying to get as close to consumers as possible.

COVID-19 has highlighted the importance of sustainability to retailers, brands and consumers as the pandemic has intensified discussions around materialism, over-consumption and general business practices and their impact on the planet.

As the learned behavior of social distancing becomes the new norm and COVID-19 forces consumers to stay at home, we can expect to see a shift in social behaviors like shopping in physical stores moving towards permanently having a digital twin. COVID-19 accelerated the digital adoption curve for a large swath of the population, and it will be up to brands and retailers to decide how they are going to respond to that. The winners will be those who make the shopping experience seamless and pain-free for these late-adopters.

We anticipate that brands will explore better ways to showcase inventory online and make sure shoppers know what size clothes and shoes to buy. This accelerates the need to elevate the online experience through innovative digital solutions. Activation will look different around the world, but the entire process from product creation to sell-through will be enhanced by leveraging digital tools. We anticipate new digital experiences to accelerate in the market, such as virtual reality, augmented and other modalities that will engage consumers in different ways.

Simone Cipriani, chief technical officer and founder, Ethical Fashion Initiative:

While brands and retailers in the Western world scramble to cope with the business implications of the COVID-19 pandemic and impending recession, the social and human fabric of whole communities in less fortunate settings is set to be literally wiped out. Order cancellations could see supply chains grinding to a halt in developing countries.

We must realize that while in highly industrialized countries, workers enjoy good degrees of social protection and are enabled to negotiate coping measures with their employers and the state, in many countries, where employment conditions and protection are a much murkier story, workers simply bear the blunt of the burden.

The reality of labor in many production centers across the so-called global South (or developing nations where labor-intensive productions, such as fashion, are delocalized in search of lower costs for labor and production) is characterized by the following factors: poor health and safety conditions; workers living in high-density settings; weak public healthcare systems; labor rights not fully enforced by law and through public authorities; and low wages, often not capable of covering the basic needs of existence.

So there is not only a moral case—which should already be more than enough—to keep working with suppliers in the global South, but also a very direct and practical interest for our global societies.

Some suggestions for fashion businesses: Negotiate changes in lead times with suppliers and check the impact of the pandemic on their workforce. Offer advice and, if needed, support—also financially—them to implement mitigating measures in factories and communities. Plan changes in orders with suppliers to minimize the impact on their structure and define investments to recover production levels once the pandemic is over. Consider your suppliers ordinary stakeholders of your business.