Covid-19: Supply chain woes and shopper cutbacks to cost UK fashion £11bn

Global fashion supply chains are breaking down due to the Covid-19 outbreak, as governments impose restrictions on movement and workers fall ill or self-isolate. The challenges are contributing to the clothing and footwear sectors taking the brunt of a drop in UK sales during the pandemic.

A shortage or raw materials such as yarns and fabrics, and of labels and packaging – many of them sourced from China – is causing issues for fashion manufacturers around the world, according to GlobalData. The research group has said that UK retail fashion sales are down by £11.1 billion compared to last year.

Economies are suffering worldwide because of the backed-up supply chain, according to GlobalData. “The knock-on is being seen in factory closures and job losses for workers who are already amongst the most vulnerable due to low wages and poor labour laws and protections, with countries such as Vietnam, Cambodia, Bangladesh and Myanmar particularly hard-hit,” said GlobalData apparel analyst Leonie Barrie.

“The situation is unprecedented, and may well worsen before it starts to improve. Liquidity and cash flow are major problems in the clothing supply chain right now. Yet there is the prospect of even more severe disruption and millions more job losses if factories don’t have the funds to survive until the end of the crisis.”

The supply chain issues have combined with consumer cutbacks to create a perfect storm for the fashion sector.

“Amid a UK lockdown and self-isolation, buying new clothes and footwear is far from a top prioroty for consumers, making spring/summer a season to forget for fashion retailers – but one with long-lasting consequences,” said GlobalData lead retail analyst Kate Ormrod.

“Fashion specialists must exploit the online channel and social media to keep shoppers engaged while their bricks-and-mortar operations are out of action, with brands needing to foster support if they are to retain relevance when consumers begin spending on non-essential clothing & footwear again. However, any notion that online sales will fully counteract those lost instore is wishful thinking.

“With the likes of M&S, Moss Bros, N Brown and Superdry having already issued profit warnings, coronavirus’ impact has been swift. Significant fallout across the fashion sector is expected this year as fundamentally weaker players fail to recover once demand finally picks up in H2,” she added.

The situation is so uncertain that companies are having trouble predicting how big the impact of Covid-19 will be on their balance sheets. Marks & Spencer, for example, has issued a statement saying that it is too early to make any reasonable forecast, but that it is planning for a prolonged downturn in its clothing and home departments.

The retailer has launched a Neighbourhood Community Fund to support local communities.

“We can’t do this on our own and so we partner with organisations like Neighbourly who link our stores to local causes so we can donate surplus food and non-food products to the people who really need it. This fund will help mobilise over 1,000 local charities and organisations across the UK to support the most vulnerable members of our community. The whole M&S family is getting involved - including M&S Bank and M&S Energy – so we can keep up the support communities need most as events unfold,” said M&S CEO Steve Rowe.

Meanwhile, a number of non-essential retailers have begun to shutter their online operations. This morning, Schuh was the latest fashion player to temporarily close its eCommerce site, saying confliction advice from UK and Scottish governments had led management to deem closure necessary.

Essential Retail’s rolling news story, includes details of many of the other retailers that have already closed their doors temporarily in light of the escalating health crisis.


 


 

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