Blog: Leonie BarrieExcess inventory adds to apparel industry woes

Leonie Barrie | 12 May 2020

With spring/summer now a write-off for most fashion retailers, the resulting flood of excess inventory is set to add to industry woes, with discounting and margin erosion likely to lead to widespread administrations for companies in the UK, Europe and the US.

Sourcing executives have responded to the crisis with order cancellations and halted payments – and many now say they are planning to purchase less apparel from their suppliers going forward.

First figures on the impact of factory shutdowns and retail store closures in March on US apparel import trends show a double-digit drop – with a 53% slump on imports from largest supplier China.

The impact on supplier factories has also prompted calls for a reform of retail bankruptcy laws; as new research suggests the US retail and apparel sector faces surging defaults over the next 12 months as companies succumb to pressures mounting from the lengthy shutdown and potentially slow recovery from the Covid-19 pandemic.

But amid the uncertainty and upheaval, the coronavirus outbreak is also giving companies a much-needed opportunity to look closely at their supply chain relationships and business models for the future.

T-shirt and activewear maker HanesBrands is ramping up the production of masks and protective garments in response to the global coronavirus pandemic – and says the business could become a permanent part of its portfolio

Potential risks in the post-coronavirus environment are also likely to make social compliance audits more important than ever.

Revenues for the global fashion industry can be expected to contract by 27-30% in 2020 and businesses must start gearing up for trading in an entirely different environment compared to the one pre-Covid.

And global cotton consumption in 2019/20 is set to suffer a 12% decline as demand plummets, with year-end prices seen falling to their lowest levels in more than a decade.

But adopting PLM as a cloud service can also provide a foundation for the further digitalisation of product design and development processes, enable greater innovation, drive more value from the business and support business growth.

Meanwhile in other news, J.Crew Group has filed for Chapter 11 bankruptcy protection; Gap Inc is eyeing new product categories as part of a licensing deal with IMG; the proposed takeover of Victoria's Secret has been axed; and footwear major Clarks is looking at a potential restructuring.

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