Most industries were hit hard by the COVID-19 pandemic, and fashion was no exception. The fashion industry, due to its discretionary nature, is especially vulnerable, as physical storefronts have experienced declining activity and overall economic growth has plummeted. However, amid the pandemic and even pre-pandemic, certain themes have emerged that are reshaping the industry’s future and bringing optimism to the new year. Today we have highlighted nine of them — that impact the fashion sector’s economy, system, and consumers.
COVID-19 could spur the biggest economic contraction since World War II, and fashion, because of its discretionary nature, is particularly vulnerable. In its annual report, McKinsey suggests that the industry’s economic profit will fall by 93% in 2020 coupled with widespread consumer pessimism about the economy. It is clear to see that fashion is not at the top of consumers’ minds --- and demand for fashion is unlikely to return to pre-pandemic levels amid diminished spending power, unemployment, and rising inequality. Stephanie Phair, CCO of Farfetch, echoes this sentiment and states “the demand curve is in line with the state of the crisis” aggravating the supply-side, and highlighting the importance of reducing inventory levels and taking a demand-focused approach. This is supported in a survey of fashion executives in which 58% agree and consider assortment planning to be a key area (McKinsey). The crisis is an opportunity to rethink the fashion business: sustainability, no more overproduction.
Sustainability is becoming increasingly important in consumerism, as more and more people are starting to pay attention to the sustainability and ethicality of the clothes they are buying, as well as the companies they are buying from. McKinsey’s “State of Fashion 2021 Report,” writes that “consumers (and increasingly, investors) will reward companies that treat their workers and the environment with respect.” To adjust to the decline in demand, companies are starting to produce less and people are starting to buy less clothing, which has resulted in a more widespread sustainable practice of “slow-fashion.” This fits in well with more widespread adoption of slow-fashion buying, as 85% of people are starting to choose a more slow-fashion approach to their buying habits (BCG). This entails that individuals are choosing “quality over quantity,” where, although consumers buy less clothing, each piece is seen as an investment: high quality, durable, and bought with the intention to be worn for a long period of time.
The changes in economic, health, and social dynamics open avenues for less traditional methods of acquiring income and employment. Amid social distancing and rampant unemployment, many individuals are empowered to become entrepreneurs. Individuals look into their own wardrobes as potential revenue sources. The consumer has become the seller, and the resale market is gaining traction. This trend is not only good for your wallet, but also for the environment, and indirectly, accelerates the destigmatization of preowned clothing.
As a result of many people needing extra income and having more time on their hands, many have started to open their own companies. This surge of micro-entrepreneurs, in addition to the publicized struggles of pre-existing businesses, has led to a movement away from corporations. Although, more people are shopping local, the US Small Business Association cites that small business employment has fallen 17%, as a result of many closing down their businesses due to lack of funds. These numbers are similar in the fashion space, hence, it is important to help as much as you can by shopping at local thrift stores.
In lieu of McKinsey’s analysis of the fashion industry, it is noted that a trend targeting good bargains for a purchase is essential, if not optimal. Taking into consideration an increase in anti-consumerism and the decrease in consumption due to the recent lockdowns, the preference for bargain shopping, as a result, becomes prolonged and more prevalent possibly shaping the methods in which the fashion market will function throughout this current crisis and in the future (McKinsey). Not to mention, that secondhand clothing plays a role here because people will be more inclined to purchase items from retailers that minimize the waste of production --- highlighting how the values of a company does, indeed, shape the consumers it attracts (McKinsey). In a resale market, clothing undergoes a circular life cycle. An item is bought new, the consumer uses and washes the item over time, and the item is resold and bought by another consumer who continues to use this item. According to BCG, without the presence of a secondhand market 60% of consumers would not have given their items a second life. Without a doubt, this cycle reduces the need to produce new clothing, but also sustainably feeds the growth of a more recent market in the fashion industry. Because of such a liquid secondhand market, 70% of individuals are now encouraged to care for their clothing in hopes of reselling (BCG).
Buying secondhand has become increasingly less of a taboo, as a result of the rise of the Y2K trend and technological advancements. The Y2K trend places an emphasis on unique clothing pieces that cannot be found at large clothing stores. Instead, many get their fashionable and unique Y2K pieces from secondhand stores. In addition, thrifting has experienced a large technological advancement, with the rise of apps like Depop and Mercari, thrifting is no longer shuffling among large racks of clothing. Instead, it is easier to search online for sellers and pre-owned items. Accessibility paired with affordability and sustainability, has led buying pre-owned clothing to become more popular. This is reflected in a forecast performed by BCG that secondhand closet share will increase from 23% to 27% by 2023.
Recent data from McKinsey show that amid the pandemic, many fashion companies have vaulted five years forward in consumer and business adoption of digital in a matter of months. For instance, Fashion Week and other such events transitioned to online presentations and showrooms (Suen, BoF), and brick-and-mortar fashion companies are increasingly looking to digital platforms to make sales. Widespread digital adoption has increased accessibility, optimized the shopping experience, and promoted innovation for fashion enthusiasts. Although there are many benefits to the digital pivot, the lack of human touch is a common complaint shared by virtual event-goers and consumers. It is essential for fashion players to persuasively integrate the human touch while optimizing the online experience.
Consumers are looking for a purpose in this world of uncertainty. Stephanie Phair, CCO of Farfetch, states that “what works is that people want authentic communication from the company. They want to buy from companies that have a mission.” Refocus your core values, and think about questions such as: Why do you matter, what do you stand for? The key points are storytelling, meaning, purpose. Furthermore, the pandemic has drawn awareness to the plight of vulnerable fashion workers and their rights, companies that treat their employees with respect will be rewarded with not only sales but also bring benefits of worker agility and accountability. Stay true to who you are as a brand and empower your stakeholders through the global value chain.
Even before the pandemic, the polarisation between sector leaders and the rest of the pack is widening. The crisis will accelerate the decline of underperforming companies and create ripe acquisition opportunities for cash-rich frontrunners in the process. This is already shown in the physical retail space, which has long been under historic levels of pressure pre-pandemic. In 2020, up to 25,000 stores were expected to close in the United States alone, more than double the number that did in 2019. The decline of underperforming companies will be accompanied by massive waves of consolidation, and M&A activity --- 45% of fashion executives expect market share redistribution to be a top theme in 2021 (McKinsey). Vikram Alexei Kansara, editorial director at Business Of Fashion, says to “don’t expect a rush of M&A right away...we’re likely to see a significant rise in M&A activity [when a vaccine becomes widely available].”
At Thryft, we strongly believe that these nine themes are key for fashion businesses to understand and capitalize on to successfully navigate a post-pandemic world. We have aimed to integrate these into our global value chain, starting from our mission --- to reinvent the way we buy, sell and think about second-hand clothing.
The pandemic has demonstrated that individuals are increasingly shopping second-hand, and will do so in the years ahead. The pre-owned market is here to stay, and we hope to be at the forefront of the change.