2021 is finally here after a decidedly gruelling year which saw the coronavirus pandemic sweep the globe, and with it, the failure of thousands of businesses. Earlier this year, we investigated the effects of the coronavirus pandemic on the clothing and apparel industry. We found that the industry was experiencing a crisis even before the pandemic hit in March 2020. Since 2018, 1,875 fashion retailers had already closed their doors. In September, the British Fashion Council Chairman Stephanie Phair said that the threat of job losses across the UK fashion industry was “incredibly concerning.”
This year, one of the biggest news stories was the collapse of the once-mighty Arcadia Group in late November. The high street giant contained Topshop, Burton, Evans, Miss Selfridge, Dorothy Perkins, and more. The group’s descent into administration risks 13,000 jobs, and they are looking for a buyer. In mid-December, it was revealed that the plus-size clothing brand Evans was bought out of administration in a £23 million deal by City Chic Collective. The Australian retailer plans to operate Evans as an online-only brand. The remaining Arcadia Brands are yet to find a buyer.
The Arcadia Group was not the only retail casualty of 2020. Women’s clothing chain Bonmarché fell into administration in early December for the second time in over a year. However, the chain remains open while administrators explore other business options. After falling into administration for the second time earlier in the year, Debenhams announced in December that their stores would close after a last-ditch effort to rescue the chain failed. The chain, which employed 12,000 employees, had been in administration since April.
There is no doubt that the coronavirus pandemic has fast-tracked the inevitable shift to eCommerce for many industries. In our earlier investigation, we found that the brands who are doing remarkably well during the pandemic focus on their digital offering. In a recent virtual roundtable with European fashion executives hosted by McKinsey, spokespeople from various fashion brands acknowledged the shift to digitisation. Stephanie Phair of Farfetch said that digital “was growing already, and this [the pandemic] will accelerate it.”
Despite the overall drop in sales for clothing and apparel retailers, some brands saw significant sales increases during 2020. For example, online retailer ASOS announced that their group sales and revenue had risen 19% to £3.26 billion. In its annual Year in Review summary, the brand acknowledged the “dramatic shift in consumer demand and an uncertain and fast-changing landscape” that they had to contend with.
The below shows a month-on-month comparison of demand in 2020 compared to 2019. It reveals that, initially, the pandemic significantly reduced demand in early 2020 when compared to the beginning of 2019. In March and April of 2020, website traffic dropped by 19% and 39% respectively when compared to the same months in the previous year. After April, website traffic began to increase and peaked in November at 25% above the November 2019 level.
Like several other clothing retailers, ASOS saw demand for loungewear increase when the pandemic began in early 2020. Executives at ASOS appear to have seen the dramatic shift in demand and decided to run with it. The retailer said that they “saw strong growth in casualwear and other lockdown relevant products”. Across retailers, demand for loungewear has skyrocketed.
Online searches for comfortable items generally saw a jump in demand. For example, searches for ‘dressing gown’ increased by 85% from December 2019 to November 2020. Evidently, the sudden changes to our lifestyle in March has created a tidal wave of demand. The retailers who will come out on top are the ones that meet this continued demand and offer customers the best online shopping experience.
When demand for clothing was not so fierce, numerous retailers had started to observe a worrying trend regarding returns. In 2019, amid concerns that customers were buying clothes, wearing them, and then returning them, ASOS changed their returns policy. In the fair use section of the policy, the retailer states that ‘If we notice an unusual pattern of returns activity that doesn’t sit right: e.g. we suspect someone is actually wearing their purchases and then returning them, ordering and returning loads – way, waaay more than even the most loyal ASOS customer would order or the items returned don’t match what you ordered – then we might have to deactivate the account and any associated accounts.’ In 2019, numerous retailers such as Amazon found that serial returners were becoming a problem, and changed their return policies to discourage the practice.
Lifestyle changes in 2020 impacted positively on ASOS returns policies. As buying habits changed due to lockdown, customers are buying less occasion-wear and more loungewear.
Loungewear, such as joggers, slippers and dressing gowns are typically returned less frequently than other clothing categories. The consumer demand for loungewear and other comfortable items has helped increase ASOS’ revenue during the pandemic.
In response to the coronavirus pandemic, and to attract more shoppers, ASOS announced it was extending their returns period to 90 days in late March of 2020. While the policy change was only temporary, it had an undeniably positive effect on customer sentiment. The actions of ASOS in 2020 demonstrate that implementing effective policies and changing those policies in times of difficulty helps to win the approval and the money of consumers.
Not only did the pandemic force countless clothing retailers to close their doors, but it also seems to have instigated a shift in consumer sentiment. Earlier this year, YouGov published an analysis of the fashion industry in Great Britain. The research revealed that low prices were the public’s top motivator when it came to the items they purchased. For 35% of those surveyed, clothes shopping was largely a financial decision.
The pandemic appears to have shifted this attitude somewhat. It appears that British consumers are growing more concerned about factors other than price. Sustainability and a demand for higher quality, longer-lasting items appears to be growing in popularity. 83% of British consumers agreed that clothing should be designed to last longer and be repairable. They also agreed that it is up to consumers to encourage the clothing sector to be more environmentally and socially sustainable.
In one survey, 69% of those approached agreed that garment workers should receive better pay, conditions and job security. This may be linked to a revelation earlier in the year that big retailers such as Primark, Matalan and Topshop cancelled £2.4 billion worth of clothing orders from garment factories in Bangladesh in order to cut some losses from the pandemic. In response, Lost Stock was born. By spending £39, consumers were encouraged to buy the discounted stock from the garment factories to support the workers who were struggling financially more than ever. Clearly, consumers are increasingly thinking about the environmental and human impact of their shopping habits.
As an industry, fashion retailers will continue to be on high alert even after the pandemic has subsided. At best, the future is disorientating. In an investigation by McKinsey and Company, those working in fashion expect that the humanitarian repercussions will outlast the pandemic. They estimate that “revenues for the global fashion industry will contract by 27 to 30 per cent”. As a result, they expect that many global fashion companies will go bankrupt in the next 12 to 18 months.
Due to the difficult circumstances, it is miraculous that any clothing retailers could grow their revenue in 2020. Evidently, ASOS found the ideal formula to keep customer demand and revenues growing throughout the year. This points to the sheer importance of prioritising eCommerce and responding to lifestyle changes and the ensuing consumer demands when they become known. It is vital to highlight that retailers will also need to consider the importance of sustainability as consumers become more eco-conscious. According to the McKinsey and Company ‘State of Fashion 2020′ report, ‘sustainability credentials will be employed as one method to regain consumers’ trust and wallets as they emerge from the discounting slump.’
The importance of monitoring changing consumer demand has been demonstrated. The companies that have come out on top have utilised as many digital platforms and technologies as they can get their hands on, and it has indeed served them well in what was a tumultuous year.
At onefourzero, our services involve in-depth due diligence reports to data-driven analysis and strategies. To find out more about our services, or to contact us for more information, click here.