At the beginning of 2020, a sudden new crown epidemic cast a shadow on the global economy. The textile and apparel industry was also severely impacted in this environment. On March 30 and April 6, the International Federation of Textile Manufacturers and the International Apparel Alliance jointly released reports to study the impact of the COVID-19 epidemic on the global textile and apparel industry.
1 Impact on the apparel industry
01 Offline income plummeted
The sudden new crown epidemic caused an unprecedented huge impact on the demand for clothing market. In order to avoid the concentration of people, many governments require stores to close, resulting in a 100% drop in sales. In areas where there is no mandatory requirement to close clothing stores, the government also calls on people to maintain social distance and stay at home as much as possible. McKinsey reports that sales at physical clothing stores in Europe have dropped by 30%-40%. In areas with severe epidemics, turnover has dropped by as much as 80%. And online sales cannot make up for such huge offline sales losses. Online sales have basically remained stable, and some e-commerce platforms have experienced declines of 5%-20%.
02 The profits of small and medium-sized brands have narrowed
The impact of the new crown epidemic on the clothing industry The negative impact is more obvious than that of other industries. The reason may be that the decline in clothing sales had already begun to show before the outbreak. Coupled with the non-essential nature of clothing consumption, a plunge in sales is inevitable. Consumers in Europe and North America need to stock up on food and DIY products in large quantities, and buying clothes is not just a necessity. It is worth noting that this kind of repressive behavior by consumers may give the market a signal of consumption saturation. Large online retailers have begun boosting sales with heavy discounts. At this time, the weather is getting warmer and the seasons are changing from winter to spring in Europe and North America. There should be greater consumer demand. This behavior of large online retailers will disrupt the market order and further squeeze the market share of small and medium-sized brands. In the current special period, we have seen that some industry associations are considering asking the government to issue a decree to limit the time period during which discounts can be made. The European Alliance for Freedom and Democracy has formally proposed to the European Commission to implement this policy in the EU market.
03 The industrial chain needs to unite to face the crisis together
Many brands and retailers canceled orders in response to the sudden collapse in sales. In Bangladesh alone, as of 17:00 on March 29, a total of 1,025 factories reported that 864 million pieces and orders worth US$2.81 billion had been cancelled, affecting the employment of approximately 2.06 million workers. The negative impact of zero sales quickly spread to the entire industry chain. Dishonest procurement has also become commonplace, with brands either abandoning suppliers directly or trying to face the crisis through deeper cooperation. The International Apparel Federation has publicly condemned unethical procurement practices amid the spread of the COVID-19 epidemic and called on the industry chain to unite to face the crisis. In fact, what is needed under the crisis is for buyers/retailers and their manufacturers, as well as manufacturers and their suppliers, to use more creative methods to solve the negative impact of the economic downturn on the entire industry.
04 Price pressure is unpredictable
Offline retail has been completely suspended. Sales can only be expected to resume after the quarantine period ends. The resumption of retail sales depends entirely on the control of the epidemic and whether a second outbreak of the virus can be avoided. However, when stores open again, brands also face difficult situations, such as excessive inventory and low market demand caused by the economic recession. This will require lowering prices to encourage consumption, which will lead to long-term low unit prices and difficulties in industrial recovery.
05 Digitalization may alleviate the industry crisis
The impact of the new coronavirus epidemic on clothing The industry is not without its positive impact. The development bottlenecks of the entire industry had begun to emerge before the epidemic, and the direction the industry needed to improve had been clear. The emergence of the epidemic at this time just urged the industry to make changes more quickly. In November 2019, the theme of the 36th World Fashion Congress of the International Fashion Alliance held in Antwerp was “Transition and Transformation of the International Fashion Industry”. The International Apparel Alliance has identified this theme long before the outbreak of the epidemic. Industry change is imminent, and it is even more imminent now. One aspect that urgently needs to be strengthened is the digitalization of the industry. Developing digital products can significantly reduce costs and improve market response. In addition, transportation expenses can be reduced. The COVID-19 epidemic has once again proved that digitalization is a major and urgent challenge facing the entire apparel and textile supply chain, so it needs to focus on cooperation with the apparel and textile industry.
2 Impact on the textile industry
01 Both output and orders Fall
So far, there is little information about the specific impact of the epidemic on the global textile industry, and market trends can only be understood from some broad indicators in the industry. The Purchasing Managers Index article released by IHS Markit on March 6 is titled “Opportunities of the COVID-19 Epidemic in February to Impact All Industries,” which may also represent the situation in the textile industry. The report includes the textile industry in the “household and personal products” category, which has seen output and new orders indexes plummet in recent months.
(Source: ITMF)
02 The sudden drop in sales will turn into a longer periodThe only source of information on the specific impact of the new coronavirus epidemic on the global textile industry is the 46th newsletter issued by the International Federation of Textile Manufacturers on March 26, which contains The association’s first survey on the impact of the new coronavirus epidemic on the global textile industry. The survey shows that as of March 25, 25% of companies have received additional orders, about 50% of companies’ orders have been postponed or canceled (10% of orders have been canceled), and about 33% of companies have had orders postponed or canceled by more than 10%. . In addition, 20% of companies expect their turnover to increase compared with 2019, 40% of them expect their turnover to drop by 10%, and 40% of them expect their turnover to drop by more than 10% (the decline can even be as high as 20%-60%). . Current industry difficulties mainly include the safety and health of workers and employees, supply chain interruptions, supply shortages or delays in the apparel industry, sluggish or significant declines in market demand, cash flow shortages, etc. However, some companies say the pandemic can help them streamline their internal processes and emerge stronger. Companies producing medical and epidemic-related finished and semi-finished products will grow further.
(Source: ITMF)
Only three weeks ago, part of The region has not yet been fully affected by the COVID-19 epidemic; but the above-mentioned sharp changes in order and turnover data reflect the impact on overall demand in the global apparel industry. The persistence of the epidemic will become an important factor in the direction of the industry.
3 Challenges and Opportunities
01 Challenge: Shortage of demand and liquidity
※Existing demand shortage and/or future demand will be severely reduced
※Enterprises lack liquidity
02 Opportunities: Medical textile products
※Enterprises It is believed that the production of fibers, yarns, fabrics and related end products related to health care and protective functions may be new opportunities. </p
