05/06/2020
Corona & Causality of 'Fast Fashion'; impact on RMG industry
Fast Fashion is likely to be the one of the biggest casualties of the novel Corona virus. For those who are not familiar with the term, Fast Fashion is a marketing concept of retailing inexpensive mass-produced apparels that are supposed to be worn a few times only to be thrown away without washing or reuse.
Prior to the emergence of fast fashion, clothing was considered to be a necessity availed by consumers who would make a purchase (of clothing) at a reasonable price, wear and wash the item and continue to use the product for at least a year or tow. This traditional clothing culture has been sustained for decades by older generation apparel brands like Levi's, Van Heusen, Tommy Hilfiger, Marks & Spencer, American Eagle, GAP, Ralph Lauren, Burberry, C&A, and Lacoste.
Then came Inditex (mother company of Zara and Bershaka), H&M, and Primark – the relatively younger brands that introduced the new concept of 'Fast Fashion' during the late 90s. With cheaper price tags, overwhelming supply and continuously-updated styles, these brands reshaped the European and North American fashion marketplace. They toppled the older brands with higher sales and more store locations, catering mostly to the younger demography – mostly millennials and the 90’s generation.
To provide a perspective, Inditex and H&M both operate over 5,000 stores, and has sales over $20 billion. On the other hand, their century-old competitors such as Marks & Spencer, C&A (both were established as early as in the 19th century) operate fewer than 2,000 stores and has annual turnover of less than $10 billion constituting approximately half the volume of products of newer brands such H&M and Zara. The difference by which the older brands were falling back was much larger in the recent past.
To catch up, the older generation brands like Marks & Spencer and Tommy Hilfiger had no choice but to adopt and follow the 'Fast Fashion' route.
So 'Fast Fashion' as a concept and as a business model gained more popularity. The business of clothing resembled that of fast moving consumer goods – frequently bought, cheap, disposable items off-the-shelf. Statistically depicting the changed scenario, an average American buyer would buy 12 pieces of clothing in a year back in the 80s. By 2015, an average American buyer would buy 60 articles of clothing in a year. In other words, one new garment being bought every week. These clothing items on average are worn around three times, never washed nor ironed for reuse, and disposed of quickly. Despite it’s popularity, one thing was for sure – Fast Fashion is a culture of waste and quite unsustainable.
Reopening of American-European market after recovery from Covid-19 is sure to see the change of this wasteful buying behaviour of consumers. With unemployment exceeding 10% in the USA and in many parts of Europe, a drastic fall of sales is feared in the Fast Fashion retail chains. Even with an optimistic rebound of employment, the buying propensity of clothing consumers is expected never to be restored at its earlier level. Many stores of the large clothing retail chains are likely to remain closed. Alternatively they might continue to operate in limited or shift to online stores. This is likely to lead to more unemployment as brick and mortar stores employed a greater number of people.
On the supply side, the shift away from Fast Fashion will hit employment even harder. Gigantic factories were built in South East Asia in countries like China, Bangladesh, Vietnam and Cambodia which were designed for mass production as was demanded by Fast Fashion. The huge apparel production capacity will have to be curtailed due to lower quantity orders from the clothing retailers. Aside from the threat of unemployment, the decline in order quantity also poses a threat to the financial viability of large ready-made garments factories. The owners would find operating these factories much more difficult since a significant part of investment in factory, often debt financed, will have to be left idle.
There is a glimmer of hope still. Hopefully the price offered by the clothing retailers will be higher due to fewer number of orders per style of clothing articles. However, even if the price improves, it will not help the laid off and unemployed workforce of East Asian clothing industry, since they are off the payroll already. This large workforce, potentially threatened by unemployment will initiate a complex socio-economic challenge for the developing supplier countries. China aside, other countries supplying the fast fashion garments do not have adequate savings or financial capacity at state or individual level to sustain the livelihood of so many workers. All that they can do is keep their fingers crossed and brace themselves for impact.
