Clothing manufacturing in Europe

In recent years, there has been changes in the dynamics of the clothing manufacturing industry in Europe, with many companies choosing to outsource production to cheaper locations across the world. As a result, countries, such as China, Bangladesh, Turkey, India and Cambodia, now rank as the leading suppliers of clothing imported into the European Union. Clothing manufacturing has shown a stable development over the last five years, reaching a peak estimated turnover of 178 billion euros in 2018. However, that figured decreased to around 162 billion euros in the following year. Although annual turnover rates have been generally on the rise in recent years, employment in the sector has declined considerably during that time period, dropping from around two million employees in 2009 to an estimated 1.54 million employees in 2019.

Leading retailers

Many of Europe’s most popular fashion brands are among the leading clothing companies worldwide in terms of brand value. Based on sales in Europe alone, Inditex of Spain comes out on top, with a turnover of around 18 billion euros in 2019, followed by H&M of Sweden and Marks & Spencer, which is based in the UK. Inditex is responsible for several well-known clothing brands, including Zara, Bershka, Massimo Dutti and Pull & Bear. The online market for clothing is also getting popular among consumers in Europe, enabling companies such as Zalando to reach revenues as high as 6.5 billion euros in the 2019 financial year. Others, like British online retailer ASOS saw their revenues increase to 3.26 billion British pounds in the 2020 financial year.

This is a question that is on everyone’s mind, but unfortunately there is no clear answer. We are seeing estimates of anywhere from 8 weeks of store closures to 12+ weeks, with the recognition that:

– Openings are likely to occur on a rolling basis, with epidemiologists predicting that stores on the West Coast, which are further along in the path to recovery, may be the first wave to reopen.
– And even when stores do reopen, we anticipate that it will take time beyond that for stores to rebound, with estimates that the rebound could take an additional 8 weeks to up to 20+ weeks (using, in part, what we have seen in China as a benchmark).

Beyond the legislation and consumer sentiment, a variety of other factors will determine likely timing of store opening and traffic recovery, with specific footprint (e.g., high-street likely to open sooner and rebound sooner than mall), ability to ramp up store labor, and level of supply chain disruption all further influencing brick-and-mortar recovery. Finally, it’s worth noting that, even in a “best case” scenario, brick-and-mortar is unlikely to “fully recover” as we believe (and consumers indicate) that a portion of their demand is likely to permanently shift online, causing a step-change in the e-commerce penetration rate for fashion categories.

For designers that are pivoting to focus on their eCommerce, what are the main challenges they will face? How has consumer spending changed? Should they be allocating more $$ to focus on online sales?

Designers should be planning for a digital pivot and allocating more money to focus on online sales. What this means is not just investing in e-commerce capabilities but the whole digital infrastructure around it, from ad spend to creating a more flexible supply chain.

This will also mean optimizing or adjusting distribution footprint to better fit with a more digital pivot, For example, is this about a handful of flagship stores that drive e-commerce in surrounding area? Or is it a more selective wholesale partnership? Remember that customer acquisition cost (CAC), prior to COVID-19, was already often proving more expensive for brands online than offline (a reason why, for example, we’ve seen brands turn to pop-ups, subway ads, mail catalogues, podcasts, etc., as means of raising brand awareness). This trend of high digital CAC is likely to continue, so it will be critical to focus on advertising with high ROI and to think about creative ways to show up where your core consumer is (e.g., partnerships, mobilizing microinfluencers, IRL experiences).

How are online retailers handling fulfillment center closures, while continuing to run their online businesses?

Retailers are doing the best they can to still support their online business and limited physical distribution where it’s still happening. They’re working to shift the work to other DCs if one in their network needs to close, and in some cases, even shipping from store inventory if they are still able to access their stores. In any case, delays and disruptions are to be expected, so the key is simply to communicate proactively with customers – when they can expect shipments, that the delay is caused by commitment to everyone’s health and safety, including that of their employees.

Is there a way for designers to push-back on retailers who are immediately discounting their merchandise? How do they protect their brand value and margins?

It’s critical to be collaborative with your key partners during this time, recognizing everyone is in a tough position. There will be a glut of spring/summer inventory that retailers need to work through, which will result in heavy discounting for strong and weak brands alike. But brands can explore with their partners how to take back product to protect it from discounting, hold core products for later seasons, or co-create promotions to clear targeted inventory quickly without discounting the entire brand assortment.

What are some of the immediate priorities brands should focus on over the next few weeks? Specifically regarding inventory and supply chain.

The first would be to rationalize assortment and set new plans for Fall-Winter 2020 and Spring-Summer 2021, starting by segmenting products into different action types (e.g., cancel, write-off, shift to later season).

Second, clear excess inventory, whether through targeted pricing and promo, alternative offline channels (e.g., re-sale, off-price, rental), or creative approaches (e.g., mystery boxes, VIP sales).

Then, manage DC capacity and replenishment and allocation by re-prioritizing product flows out of DCs, reducing initial allocation and replenish levels, leveraging “dark stores” and direct-shipping eComm orders from suppliers.

And lastly, collaborate and partner with key suppliers, recognizing that we are all finding ourselves in a time of unprecedented challenge and that, by partnering together, we are more likely to survive the long-term fight.

Once stores reopen, will consumers feel comfortable shopping brick-and-mortar? How can brands navigate consumer concerns?

Looking to how retailers have reopened in Asia, we believe it will take time for consumers to feel comfortable shopping in brick-and-mortar. In China and South Korea, for example, we see retailers being hyper visible and hyper vigilant about safety measures, which seems to help reassure consumers, e.g. by ensuring all employees have personal protective equipment (PPE) like gloves and masks; by clearly indicating that employees have passed temperature checks; taking consumer temperatures; having sanitizing materials publicly displayed and even taking time at every hour to do a full clean down of the store; by limiting the activities allowed in store (e.g., no unassisted trial of beauty products); and by severely limiting the number of employees and customers allowed in store at a time.

In the U.S., we are seeing retailers take similar, highly visible measures, enforcing social distancing, publicly announcing safety measures being undertaken, changing store layout, etc. But even with all these measures in place, we believe it will still take time for consumers en masse to feel safe shopping in store (and this will be significantly greater an issue if the virus has a resurgence in the fall).

What are some of the best methods to engage with your customer at this time?

A lot of this is going to sound like common sense, but it’s worth repeating: be transparent, authentic and show you care. Over-communicate — 90 percent of consumers report that they are eager to engage with brands at this time. Prepare for e-commerce boost and consumer shifts by maximizing your CRM activities, optimize digital spend to focus on conversion, and identify potential digital-first marketplaces / wholesale partners that will be in a strong position post-crisis. And, of course, spend wisely with smart promotional engagement. We are starting to see a lot of undifferentiated site-wide promotion and that is a dangerous path to take teaching the consumer to only buy on discount. Consumers may need promo to prompt purchase, but you can be smart about promo architecture by channel, category and consumer segment.

Africa’s $15 Billion Fashion Industry

Africa’s creative industry overall has started gaining notice both regionally and internationally. Several local fashion brands have earned global recognition due to the talent and artistry of their designers. One remarkable award-winning designer is Folake Folarin- Coker. Her brand Tiffany Amber has particularly become popular during the New York Fashion Week. In the meantime, her collection has been displayed in London, New York and Paris. Another upcoming artist, Deola Sagoe has dressed international artists like Rihanna and Solange Knowles.

The African footwear industry is still in the nascent stage. The continent is abundant in raw materials, skill and labour which are imperative for the growth of any industry. Several countries on the continent are contributing to the African footwear revolution, including Ethiopia, Ghana, Kenya and Nigeria. Ethiopia for instance, is ranked in the top ten of leather exporting countries worldwide and has been able to generate considerable income from shoe exports in 2018.