Retail isn’t doing well. Since the coronavirus pandemic swept across the world, it’s brought once-strong industries and businesses grinding to a complete halt.
Bustling shopping malls suddenly fall quiet, as people continue to behave responsibly by sheltering in place, avoiding crowded areas out of fear of getting sick. Almost all fashion brands across the consumer spectrum have shuttered down, following advice from respective health authorities. Meanwhile, fashion spending has nosedived as well, given that the loss of employment will mean that one cannot spend as freely as before.
In a report released at the beginning of May by consulting firm Bain & Company, the forecast for global luxury spending within the second quarter of the year could plummet by a further 50 to 60 percent, with a full-year contraction predicted within the range of 20 to 35 percent. Suffice to say, it’s not looking good for retail.
And if the numbers weren’t a sobering confrontation of the road ahead, within the span of two weeks, three household names in fashion have already begun filing for bankruptcy protection.
First came J.Crew Group, which owns and operates both J.Crew and Madewell. Best known for their all-American aesthetic that features gleaming models smiling down at you from the billboards, all decked out in argyle knits and nonchalantly mismatched suits, for the last 37 years, J.Crew has been the go-to store for the everyman who wanted preppy-looking clothing on a budget.
Following J.Crew’s announcement, was menswear brand John Varvatos’ own news of its bankruptcy filings. A favourite brand amongst Hollywood stars — including Nick Jonas and Chris Hemsworth — the company began proceedings on May 6th by listing assets that accumulated to around US$50 million, as well as liabilities of at least US$100 million.
Then – and perhaps the one name that rang familiar to most — Texas-based department store group Neiman Marcus joined the ranks of brands filing for bankruptcy protection. Addressing his longstanding customers through a letter, Neiman Marcus’ CEO Geoffroy van Raemdonck highlighted that despite the grim-sounding news, there were no immediate plans to liquidate the business. He added that once the situation permits, he plans to have stores reopened again.
What needs to be noted, as well, is that bankruptcy does not equate to going out of business. If anything, bankruptcy proceedings will help cash-strapped companies to reevaluate liabilities and shed some debt weight that they don’t have the financial means to meet. On top of that, these filings also allow a company to tighten its operations and shut down unprofitable branches if the need arises.
Still, a company in the midst of Chapter 11 proceedings is rarely a good sign.
Beyond the spate of closures and bankruptcy filings, other retailers are also tightening their belts. At the beginning of April, Saks Fifth Avenue issued a memorandum to designers and vendors explaining that they would have to delay payment on all orders for up to three months – thereby curtailing the liquidity that some independent brands might rely on to weather the next few months.
Perhaps there is something to be gleaned from the smalled-scaled brands within the industry. Where these independent labels have always fared better is in maintaining a two-pronged approach to peddling their wares. Apart from B2B relations, having a smaller brand name allows them the flexibility of working on a B2C model as well.
Many of them already have e-commerce platforms set up, and some brands have also made use of shoppable functionalities on social media to help drive more direct sales. After all, when you don’t have a heap of cash to fall back on and run a modest operation, you need to try and expand your retail model to ensure maximum returns.
This flexibility to move with the times and to connect to shoppers beyond face-to-face retail has always been a trait that gives them a competitive edge on big-name fashion houses.
Marquee-named brands have always preferred the humanistic element in developing long-lasting relationships with their customer within a brick-and-mortar boutique, and their customers have returned in kind historically. This, coupled with the already-saturated online marketplace, has led to luxury brands to lag in adopting technological retail solutions. Even in Singapore’s context, it wasn’t until our circuit breaker measures were introduced that many luxury houses began to think of alternative shopping methods. Before that, they still relied on their physical retail spaces heavily.
Younger labels, on the other hand, understand that connectivity is also a currency. They are able to create a product, have it photographed, uploaded, and broadcasted across Instagram in a matter of days. And in these hours where most fashion consumers are stuck at home idling on the Internet, there’s a trove of ready customers that are waiting to be engaged.
While a study done at the end of March revealed a downturn of 11 percent in online revenue for apparel, the overall e-commerce revenue within the U.S. alone enjoyed an upshot of 50 percent.
Amazon posted employment opportunities numbering in the thousands, as it looks to expand its logistics department, while China e-commerce heavyweight Alibaba reportedly hosted over 300,000 businesses in their daily retail live-streams on their shopping site Taobao.
What this means is that if retailers – regardless of size or independence level – can market themselves in an online sphere with sensitivity and in a brand-coherent way, whilst making full use of the many tech solutions available to them, they might be able to ride on the surge in online spending.
Back home, several brands have also come up with novel ways for consumers to continue shopping. Brands such as Fendi, Gucci, and Celine have all set up secure ways for shoppers to get in touch with sales ambassadors to continue shopping. Potential customers will see the latest arrivals, shown personalized curated picks, and get fashion tips without having to leave the safety of their homes. To allow them to enjoy their purchases sooner, some brands are also ramping up logistics to provide same-day or next-day delivery options.
On top of that, The Shoppes at Marina Bay Sands has also rolled out their Shopping Concierge – a first of its kind in Singapore. The digital service lists an impressive array of products that include the latest drops from Bottega Veneta, Loewe, and Moncler for customers to pick and choose.
“Through this service, we want to make luxury shopping an effortless pursuit for our customers,” says Hazel Chan, vice president of retail at Marina Bay Sands.
Shoppers also enjoy complimentary delivery island-wide. No more having to wander through a dark shopping mall after a late dinner, because a digital service like this will always be accessible at any hour.
Beyond the pandemic, it’s hard to say what lies in store for the retail scene. While some customers will flock back to their favourite retail haunts in an attempt to return back to normalcy, analysts are also predicting that a group of consumers will cut back on spending after having seen that they can do without having certain indulgences.
Yet, there are ways that retailers can work with to gain surer footing. For one, the pivot to online shopping is all but crucial. If a pandemic like this has shown us anything, is that technology has now become to intrinsically linked with our day-to-day lives. To ignore the power of the online consumer is almost tantamount to failure.
Given that the travel industry is also reeling from its own setbacks, global shoppers will begin to look homeward to satisfy their itch for some retail therapy.
This means that businesses should also begin to prioritize messaging that is relatable to shoppers dwelling in their home turf. In doing so, they not only demonstrate an understanding of the local shopper and the culture, habits and anxieties specific to his/her geography; but also build a relationship that precedes having facetime with the consumer.
And if these little glimmers of hope aren’t enough to bring some light to the tumultuous retail tunnel, there is some comfort to take in the sales figures coming out of China.
Since easing lockdown measures in March, China’s retail market has seen healthy improvements in the sales of beauty products. Investment bank Jeffries reported that in the weeks after shoppers gradually began returning to the shop floors, the cosmetics industry in China rebounded by about 40 to 60 percent.
One example was cosmetics giant Elizabeth Arden. Over a single day, the New York-based monolith managed to ring up an approximate total of US$21.6 million within the Chinese market, thanks to the brand’s smart use of discounts and digital campaigns. This amount was equivalent to a quarter of the brand’s total sales for 2019.
Other reports stated that Hermes chalked up US$2.7 million in sales figures within 24 hours of re-opening its flagship store located in Guangzhou, though the French brand has remained tight-lipped in verifying this figure.
All in, the ability to react quickly to the changing consumer profile and the collective effort to rethink how the traditional retail model should look will help the industry get back on the slow and steady path to recovery.