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Why Fashion Can’t Just Hit the Restart Button to Reemerge from COVID-19

Everyone is focused on getting through “this.” The industry is in survival mode, even as we attempt to maintain our regular business and sustain our usual practices; everything has been recast in the light of examining what needs to be accomplished to get us to tomorrow, to next week, to when “this” is over.

But what is “this” and when and how will it end?

Things are not going back to the old normal. That doesn’t mean the world is ending, that’s just a fact. When circumstances are adjusted to allow for a relaxing of restrictions and a resumption of more active business activities, there will be many considerations to how that will be done. The logistics of that will be complicated and difficult decisions will have to be made. It won’t be like it was. Fashion businesses must figure out how to move forward, not to just survival but to success.

Post-traumatic growth

We collectively have been through a trauma. People talk about post-traumatic stress. But a recent New York Times article raises the concept of post-traumatic growth: the opportunity for individuals to transcend a traumatic experience and emerge better. The same thing can happen for companies.

Whatever your company’s place in the fashion, apparel and textile marketplace—manufacturing, sourcing or whatever role or roles you fulfill—the coronavirus crisis can present an opportunity to reorganize and reorient your approach to success.

Some of that reorganization will be necessitated by financial necessity, but you can couple those adjustments with more thoughtful revisions to the structure of your business to improve how your business operates.

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Review your business structure

From a structural or legal point of view, this can mean looking at the agreements that form the framework for how you conduct your business, both internally (partnership, operating, shareholder, employment and agency agreements) and externally (manufacturing, distribution, licensing agreements).

Do the terms of these agreements still make sense for you in the coming business environment? Everyone will be looking at business afresh. This is the time to reinvent how you want to do business and approach the parties to these agreements to negotiate a change. The key will be in recognizing and identifying to these stakeholders how changes will benefit them as well.

In terms of the internal structure of your business, examine the agreements that control the operation of the operating entity. Let’s say your company is governed by a shareholders agreement and an accompanying set of by-laws. It contains provisions on management, officers, directors, voting, buyouts, employment, termination, compensation and many other concepts.

What has this crisis period taught you about how the business responds in a uniquely difficult situation? Who is making the critical decisions and how are they made? Who has taken on responsibilities and who has seemed overwhelmed by the circumstances?

It would be wise to realign your formal decision-making structure so that it reflects the decision-making process that you instinctively adapt to in a crisis. If the structure you have set up in your by-laws for meetings, voting and other procedural matters proved to be so cumbersome in a crisis that you ignored it, you should revise your processes so that they reflect reality.

Going forward, this will probably not be the last emergency situation your business will face, although hopefully nothing as drastic as the current one will come again. But it makes sense to have internal structures that are lean and easy to resort to in a crunch.

It is crucial that the proper decision making-structure is followed so that the company does not open itself up to claims. So, the actual process you want to use has to be consistent with what you have in your agreements.

Examine your business relationships

We recommend a similar analysis of the third-party agreements and the accompanying relationships you have been relying upon during this crisis. Do your agreements reflect what you have actually been doing?

Have you been making informal adjustments in processes and relationships in order to get things done? Starting now and going forward, it makes sense to take an inventory of all of the moving parts of your business and decide what works and what doesn’t.

Then examine your corresponding contractual relationships: manufacturing, distribution and anything else and make sure that the agreements reflect the reality of how the business is running.

The same hard-nosed analysis is necessary with your employment and independent contractor agreements, including agents. You should be getting a sense for who can be counted on in a highly difficult environment. Those are the people you should be locking down with strong agreements that you both can rely upon. You should give yourself more flexibility with the others, and move in a different direction if you need to.

All of this involves crafting different and more personalized agreements to address the specific requirements of particular arrangements. This is actually not as complicated as it sounds and serves you better in the long run.

Using standardized or boilerplate documents ignores the rapid changes of the real world and the nuances of each situation. It does not take much work on a document to cover specifics and it is more than worth it in the trouble it saves you.

Making the hard decisions

Some of this sounds cold-blooded, and while it may not be that difficult to cut off a relationship with a unreliable supplier, ending a longstanding employment or agency relationship can be much more difficult.

But your company is in the process of surviving the greatest economic and social crisis of our generation. No one wanted to go through this, but you have and you can learn important lessons from it. What worked for you to keep your company afloat can work for you to make you a success in the next chapter of this economy.

Pay close attention to those pluses and minuses and make sure they are reflected in your agreements and corporate infrastructure. Creating reliable processes and following them is the key to your success.


Terrence M. Dunn is a founding partner of Einbinder & Dunn LLP. He leads the firm’s fashion law, business, real estate and trusts and estates practices.