Fashion Retail in Crisis

While some sectors of the retail business have been able to continue due to their essential nature, fashion retailers have been especially hard hit by the Covid-19 pandemic. Most major fashion brands ceased brick and mortar retail operations in mid-March right at the height of the spring selling season, focusing their efforts on e-commerce. However, the global supply chain that powers the fashion industry has been very compromised, hampering overall distribution of products from manufacturers to retailers, and then on to consumers. And because the virus is affecting different parts of the world at different times, normal supply and demand has been thrown off balance. For example, while the US was still “business as normal” during the early part of the year, China was all but shut down. Now the reverse is true. On top of that, as more and more Americans are unemployed due to the crisis, retailers can expect to see sales drop. Customers will be focusing less on fashion and more on essentials.

In short, retailers are grappling with how to cover expenses with severely limited cash flow. This has led many companies to make the hard decision of letting employees go or putting them on furlough, which is unpaid leave. The hope for retailers, is that if they can withstand the crisis, keeping their workforce will help them to get back to business quickly. However, this decision has forced employees into a very difficult position—whether to withgo their paycheck in hopes of returning to work, or whether to start searching for a new job.  The longer the crisis continues, the more this issue is exacerbated for the company and the employee.  

The reality is that retailers don’t have a lot of choice at the moment. And the hard truth is, that most retail executives are likely using this time of crisis to rethink “business as usual”—to really consider what their core value is to consumers and how to re-focus and reset. The implications of these decisions will be dramatic.