Apparel continues to be the worst hit segment in retail due to Covid-19 as store closures and virus-wary consumers have severely dented seasonal spending.
The rising unemployment and threat of a global recession will exacerbate the contraction of the consumers’ expenditure on apparel,” says GlobalData, a leading data and analytics company. “As predicted, the pent-up demand is coming mainly from young consumers while family life-stage and older consumers continue to rein back on their discretionary spending.”
GlobalData forecasts that Covid-19 will wipe US$395.6bn from global clothing and footwear sales in 2020, a 19.5% decline on 2019. The firm adds the segment’s loss of sales is highly significant as it is equivalent to 29.1% of the US$1.36trn of total sales lost by the overall retail industry in 2020.
Similarly, Asia-Pacific (APAC) post-Covid-19 forecasts for the sector are $95.4bn lower than those prior to the pandemic, responsible for 16.3% of the overall retail sales lost in the region in 2020.
Meanwhile, GlobalData says the crisis has changed the purchasing attitudes of consumers. Most declare that trust is an important factor when purchasing products, with 60% stating that trustworthiness, risk-free and familiarity are factors influencing their choices of products/services, according to the firm’s Covid-19 Tracker Survey. The study covered 5,500 respondents across Australia, Brazil, China, Germany, India, Italy, South Africa, Sweden, the UK, the US and the UAE from 25-31 March, 21-26 April, and 26-31 May 2020.
“Brands need to continuously engage with consumers through social media channels and personalised messages to stay in contact and engage with their customers. They should continue to build trust by delivering messages addressing Covid-19 and social responsibility and advertise the safety and hygiene measures taken during the manufacturing process and in-stores to drive more consumers to the stores,” says Vijay Bhupathiraju, retail analyst at GlobalData.
On the other hand, the pandemic has already caused reduced product availability, assortment gaps and stock delays across apparel sectors. With severe financial uncertainty, suppliers will find it difficult to get credit insurance with retailers, and retailers will have less flexibility with their supply base.
Bhupathiraju adds: “Suppliers will be struggling with cash flow as many retailers have cancelled outstanding orders and extended supplier payment terms. Although normal production may not resume for a while, the eventual surge in demand will likely leave ports congested, resulting in a backlog of shipments.”