The clothing giant handed in the "worst" report card, and the market may suffer a huge loss of nearly 300 billion US dollars! How to carry this cold winter?
The 2020 new crown epidemic has made the already highly competitive apparel industry worse. Under the epidemic situation, clothing companies have been hindered in their production and operation, and faced multiple difficulties such as reduced market demand and shrinking orders. What is the current state of survival of the companies?
Downturn in the apparel market, discounts and promotions become the norm
Guangzhou Panyu Clothing Market is a well-known clothing wholesale market in China. In the past, the market was bustling and crowded with people picking up goods, but now there are very few customers on the whole street.
In the past, the clothing wholesale market rarely offers discounts, and the prices are generally based on the quantity of the customers. This year, the banners for discounts and promotions appeared in almost every store.
Discount sales are not a special case of the clothing wholesale market. On the other side, Wuhan's "shopping paradise", Chuhe Han Street, which has well-known brands at home and abroad, will also carry out discount sales to the end. This year's clothing industry has a significant gap compared with previous years. On the one hand, manufacturers were unable to start operations in the early stage of the epidemic, resulting in untimely supply of product categories; on the other hand, there are too many discounts in retail stores, the normal level should be 20%, and now it has reached 40%. Nevertheless, there are still not many consumers.
Financial expert Ye Tan: Before the epidemic, there were actually many similar clothing brands in China, including those that had done a lot in the past, all of them went bankrupt. Now we are in the process of reshuffling. On the one hand, the company has closed down, and on the other hand, some new brands will emerge.
According to official data from the China Apparel Industry Association, from January to May 2020, the retail sales of apparel products above designated size in my country totaled 288.7 billion yuan, a year-on-year decrease of 25.6%, and the online retail sales of clothing products fell 6.8% year-on-year.
The global clothing industry collectively spends the winter
Under the impact of the epidemic, domestic and foreign clothing brands have been affected. Some brands are facing bankruptcy and some have to close many stores around the world. The global apparel industry is experiencing a collective cold winter. Affected by factors such as mismanagement and the epidemic, the well-known underwear brand Victoria's Secret British company headquartered in New York, USA entered the bankruptcy liquidation process. More than 800 jobs were in danger. The Victoria's Secret Show opened in Shanghai, China became the fashion swan song of L Brands.
In recent years, Victoria's Secret has begun to decline. In order to save the brand, Victoria's Secret has made a lot of efforts from changing brand spokespersons to developing new products. But for now, self-rescue measures have little effect. On July 8, the Brooks Brothers, an American menswear brand that operated for 202 years, filed for bankruptcy. The New York Times stated that Brooks Brothers is the "oldest continuously operating clothing brand" in the United States. Since their birth in 1818, the Brooks brothers have provided clothing for 40 American presidents, including Lincoln, Roosevelt, Nixon, Kennedy, Bush, Clinton, Obama and Trump.
The Brooks brothers survived the two world wars and the Great Depression. Many Americans call this classic brand almost the same age as the United States "the pride of the country." Even with 200 years of brand equity, the Brooks brothers still failed to resist the impact of the epidemic.
In the three months to the end of April, Zara’s parent company Inditex’s sales fell 44% year-on-year to 3.3 billion euros, with a net loss of 409 million euros.
Inditex has announced that it plans to close 1,000 to 1,200 stores by 2021.
The Chinese fast-moving brand La Chapelle closed 4,400 physical stores last year, and revenue continued to decline sharply in the first quarter of this year, down 57.75% year-on-year.
Sweden H&M, the world's second largest clothing retailer, had 3778 stores temporarily closed as of the end of March.
GAP, the largest clothing brand in the United States, was already in fatigue before the epidemic. Under the influence of the new crown epidemic, GAP's sales in the first quarter fell 43% to 2.1 billion US dollars, operating losses reached 1.2 billion US dollars, and all brand offline store sales fell by more than 50%.
Ding Shijie, textile and garment industry analyst at Guosen Securities Economic Research Institute: From the situation of domestic listed companies, we can see that the entire textile and garment industry, including manufacturing and brand sales, has disclosed its interim results. According to the forecast, the net profit has basically fallen sharply compared to the same period. Among them, 9 companies have pre-losses, which is about 32%. The research report of Global Data, an international research and consulting company, pointed out that due to the impact of the new crown virus epidemic, the total loss of the global apparel market in 2020 will reach 297 billion US dollars. The most serious losses will be the most mature markets. It is expected that more fashion companies will file for bankruptcy in the coming months.
How does the clothing industry ride the wind and waves under the epidemic?
Layoffs, salary cuts, suspension of production and business closures are the initial three tackles for clothing companies to help themselves. Now, with the help of new retail and 5G technology, transformation and upgrading have become the new hope of the apparel industry. According to data from the National Bureau of Statistics, in the first five months of this year, China’s retail sales of clothing, footwear, and knitwear products totaled 406.7 billion yuan, a year-on-year decrease of 23.5%.
On the contrary, Uniqlo, a clothing brand with consecutive declines in sales, achieved a year-on-year growth in both single-month revenue and profit in Greater China in May, and its performance rebounded significantly.
Ma Ying, Secretary-General of the Clothing Branch of the China Chamber of Commerce for Import and Export of Textiles: From the perspective of consumption trends after the epidemic, consumers are more inclined to pursue the ultimate cost-effective product without lowering their consumption level and quality of life without reducing their consumption levels and quality of life.
Domestic brands represented by the price-performance ratio also gained growth momentum in this crisis. According to data from the Ali Research Institute, domestic brands accounted for more than 70% of the brands with cumulative sales of more than 100 million yuan on Tmall in the first quarter.
On February 14th, the women's clothing brand Goliath recorded nearly 4 million transactions in a single-day live broadcast of the mini program.
The domestic apparel group Peacebird uses WeChat spikes, small program distribution, and alternate live broadcasts in different cities or regions. Although half of its stores are closed during the epidemic, the average daily total retail sales still exceeds 10 million yuan. Men's clothing brand Common Gender adopts a combined online and offline, omni-channel sales model as soon as it goes public.
With the restoration of logistics, online clothing brands have returned to the right track. Adidas’ financial report shows that brand e-commerce channel sales increased by 35% in the first quarter, and the growth rate reached 55% in March alone. The financial report also specifically pointed out that investment is being accelerated to support the work of e-commerce business.
Financial expert Ye Tan: The current business channel, the model has undergone great changes. If online marketing can be combined with distributors, the transformation can be successful, and the company can stand out. If online marketing and offline marketing are delayed, such enterprises will be annexed.
As the post-90s and 00s have become the main force of consumption, their preferences, habits and needs have attracted much attention, and personalized consumption experience has become a feature of young people. Under this wave of clothing industry, changes are quietly coming.
Ma Ying, Secretary-General of the Clothing Branch of the China Chamber of Commerce for Import and Export of Textiles: As an enterprise, it must first enhance its core competitiveness and constantly respond to changes in the market and consumers. This is the magic weapon for success.