The fashion and apparel industry is one of the most important consumer-facing industries. Globally estimated to be upwards of $2.5 trillion (nearly the size of the Indian economy), the industry is expected to decline by 20% this year due to the impact of Coronavirus. As consumers tighten their purse strings and double down on non-essentials, apparel and fashion is one of the first categories to take a hit. This sector, besides providing employment to millions of people (primarily women), is the harbinger of the larger consumption story.
In this article, we look at five mega trends likely to define the fashion and apparel industry.
With evolving consumer behaviour, key categories like athleisure, professional comfort wear without an exhaustive season orientation are likely to come to the forefront
As consumers are likely to stay at home for a longer period of time with limited work and social interactions, categories such as women’s athleisure which were already accelerating (5% incremental growth over other categories pre-Covid) are bound to increase its pace of growth. In addition, professional work wear variety and styles might take a hit and shift towards everyday comfort wear. Needless to say, comfortable home clothing and fashionable masks are expected to rise. There is a likely tendency to move away from seasonal fashion (e.g. spring, summer) to an all-year-long comfort wear with a reduction in the number of new SKUs every year (historically at 30%-35% for the fashion industry).
From an online channel perspective (apparel constitutes 35% of e-commerce in India), items that have not been worn by multiple consumers (e.g. socks, inner wear) are likely to see continued robust demand while other categories are likely to see muted demand due to consumer fears of others having tried it out. Given consumers are turning conservative, price-conscious consumers are likely to down-trade (e.g. preference for Arrow rather than Arrow New York) and are less likely to focus on values like sustainability. Emerging go-to-market models like rental, subscription, and re-commerce are likely to take a substantial hit in the interim due to concerns over safety and hygiene.
Consumer marketing and events creating fashion needs are going to turn virtual with communication values turning more conservative rather than liberal
Over the last few months, fashion shows like the ones hosted by Chanel, Ralph Lauren, Dior, Hermès, and the London Fashion Week are turning virtual. This trend is likely to continue for the next few quarters. Leading influencers are likely to turn to digital marketing in the current scheme of things. For instance, leading designer Sabyasachi Mukherjee had turned to Instagram to launch his collections, break through the clutter, and directly engage with the end consumer. In addition, there is an increasing trend of leveraging influencers to build word of mouth (e.g. K-pop superstars partnering with global labels) rather than movie actresses.
In terms of communication values, consumers are likely to demand conservative values hovering around safety, hygiene, trust, and reliability rather than progressive values around innovation, sustainability, and progress. However, there might be a greater acceptance of inclusive sizes as part of fashion wear and a movement away from unrealistic body expectations.
Technology, from window shopping to the in-store purchase experience, will play a pivotal role in the consumer buying process
Apparel is one of the industries where consumer buying behaviour had matured to a combination of digital and physical (also termed phygital) channels. This trend is likely to continue but consumers will increasingly window shop for products online and prefer to purchase from a store (except for categories like inner wear and socks which can’t be tried by others). As a result, e-commerce players have to run massive discount engines over the next two-three quarters (e.g. AJIO is running a 40%-70% sale as I write this) to attract consumers back into their fray. At the physical stores, large organised retailers are expected to experiment with virtual trial rooms and augmented reality while contactless payments are likely to turn a reality everywhere. In addition, like FMCG, for last mile e-commerce delivery, physical stores will also start operating like pick-up points.
The human job loss due to Covid-19 will be significant in tier 1 cities and textile production clusters; however, tier 2 and 3 cities should see limited negative human impact
In India, the apparel industry employs nearly 150,000 people (primarily women) in its production clusters (e.g. Tirupur, Ludhiana). With large labels shut in the U.S. and Europe, thousands of women have lost their jobs. In tier 1 cities, sales personnel (primarily women again), have also been relieved due to reduced footfall. As a result, the government of India has been appealing to big apparel buyers not to cancel orders.
Until demand stabilises, this trend of job losses is likely to continue. However, in tier 2 and 3 cities, where demand is more robust with limited perceived damage due to Covid-19, the likely impact on human jobs is likely to be lesser.
Global supply chains are bound to shift from China to other textile powerhouses with potential rise in local manufacturing and robust packaging
With a growing anti-China sentiment, there is a likely scenario of apparel exports shifting from China to Bangladesh (approximately $28 billion in FY20), Vietnam, and potentially India (approximately $15 billion in FY20). There is an opportunity for India as it produces woollen or woven products which are more advanced than T-shirts that Bangladesh specialises in. With the fear of Covid gripping everywhere and resultant delays in global supply chain cycles, there is an expected 30%-40% increase in inventory costs across global supply hubs to make up for potential disruptions. Over a period of the next four to six quarters, local production with a ‘made-in-the-host-country’ mindset is likely to rise due to political tensions specially if Covid is not contained till then.
In terms of product packaging, anti-viral packaging that can be opened only once is likely to become the norm while consumers sample for their sizes and feel during shopping on standard items that are sanitised regularly.
In summary, the fashion and retail industry is bound to see a lot of action over the next few months as it tries to re-invent itself. Luxury brands (e.g. LVMH, Burberry) are likely to rebound faster as their consumers have been historically less sensitive to price and catastrophic events. With the upcoming festive season, most apparel players would be praying for a miraculous recovery. For tier 2 and tier 3 apparel players, the upcoming festive season would be making them laugh all the way to the bank rather than just reducing a grimace.
Views are personal. The author is an MBA from IIM Bangalore and a strategy course holder from INSEAD. He has been a strategy consultant for over a decade. He is the author of three books, ‘Yours Sarcastically’, ‘Satan’s Angels’, and the upcoming ‘Hacks for Life and Career: A Millennial’s Guide to Making it Big’.
