How COVID-19 is Rewriting the Rules For Fashion Retailers

The ongoing pandemic is affecting every sphere of life – from how people work, places they visit, to ways they spend their money. There is no doubt that the current situation has affected all industries. But one, in particular, has had to adapt greatly. Fashion.

Fashion retailers have seen a complete overhaul of people’s buying habits. In May, sales at US clothing shops were down by 62.4%, and in Europe, retail sales were 50.5% lower in comparison to 2019. All of this signaled towards a terrible year for brick and mortar fashion companies.

So, what was going on here? The fear of the virus clearly restricted customer visits to retail stores. Consumers stuck to buying essential items only and tried to stay indoors as much as they could.

As the COVID situation progressed, the initial fear and panic slowly started to ebb away. Customers slowly began to buy non-essential items again. But the virus is still very much here. So they turned to eCommerce – an opportunity that online retailers have been waiting for.

Even designers who weren’t open to the idea of selling products online, noticed this paradigm shift. One thing became crystal clear: Going digital was the only sustainable way of operating in the COVID era.

Top five categories consumers reported purchasing more online during the pandemic outbreak

Despite the unfavorable circumstances, certain retail categories still recorded a growth in sales.

According to Dotcom Distribution’s 2020 e-commerce consumer study, fashion is one of the five categories that customers reported purchasing more online.

•       Home Goods (45%)
•       Clothing (29%)
•       Electronics (25%)
•       Beauty/cosmetics (22%)
•       Accessories (20%)

One of the largest fashion retailers in Europe, Zalando shared some facts that support these numbers. They state that their sales grew 34% in the recent quarter due to clients buying more online.

However, they aren’t the only ones who witnessed a spike in sales.

• ASOS, an online fashion retailer based in the UK, also quoted a 10% sales increase during the first quarter.
• Online fashion retailers Revolve and Farfetch also reported growth.
• A marketplace for luxury fashion based in France, Vestiaire Collective, reported that the number of items that were bought during May is 119% higher in comparison to the same period last year.

One would assume that needing to try out clothes before buying them would prevent fashion stores from being successful online. Well, not quite. It seems that this industry made a transition to the digital realm much faster than others.

How did online retailers manage to score such good numbers?

At the beginning of the outbreak, the vast majority of purchases were done out of necessity. 58% of online shoppers said that they are now buying everything online.

However, as the situation became the new normal, other purchasing factors got involved as well. 26% of buyers have characterized their purchases as a result of boredom, while 24% reported online deals playing a key role.

However, research shows that shoppers were making purchases mostly with major retailers (65%), such as Amazon. It’s also important that 35% of consumers reported buying from local businesses, as a way of support. These numbers should be taken as a lesson for those who still haven’t understood the importance of having an online store. In uncertain times, buyers decided to put their trust in known brands. Therefore, the ones who just shifted their business online due to COVID-19 found themselves behind even from the start.

An encouraging fact for online retailers is that 73% of respondents have tried at least one new online retailer since this situation started. This for sure marks a positive trend – customers are willing to try emerging online retailers.

What do these facts mean for fashion retailers?

Experts predict that these behavioral changes will only encourage shopping behaviors. Of course, many people will go back to their old purchasing habits once the pandemic is over, but the shift will clearly be there.

This situation is likely to push competitors to invest more in their eCommerce business aspects.

Even though big players look better positioned and more prepared for the post-pandemic effects, the appearance of new online shoppers hasn’t benefited all companies. For instance, some of the most known luxury fashion hubs, Net-a-Porter, reported a 42% drop during this quarter.

Fashion Retail Strategy After Lockdown

In this extraordinary situation, the vast majority of fashion brands knew they needed to work on a new strategy to survive the lockdown. Here are the four main areas they focused on:

• Promoting a positive brand image - Once the first brands started using their resources to sew masks for health workers providing services in hospital as nurses or at home like cold therapy, the rest followed. Fashion stores wanted to help out in whatever way they could in order to stay relevant in the crisis. Every company wanted to push a socially conscious image to win public favor.
• Cutting costs – Businesses needed to reduce overhead costs. They did this by temporarily reducing employee salaries and benefits, renegotiating loan terms and conditions, and establishing new payment terms with suppliers to survive plummeting sales. Many struggling businesses also applied for government-rescue packages.

• Developing a recovery plan – Planning is necessary since not all countries will be able to recover at the same pace. Therefore, brands and online retailers should focus on “recovery regions“. For example, the US and the European markets are expected to recover at a slower pace, while Chinese growth is expected to come in at a paltry 1.5%. Thus, the focus should be on the regions that will face the recovery sooner. But, until that moment comes, brands can rely on social media and partnerships with marketplaces in order to sell their products.
• Winning customers -- Winning customers again is critical for recovering sales. For loyal customers, email them special offers or exclusive products as part of a loyalty program. For new customers, first-purchase discounts would be helpful in building trust. If the brand is already selling through eCommerce channels, then that would be a nice opportunity to offer a discount (Nike, for example, is offering 25% off for buying online). Deals can also be made based on the season products, colors, sizes, etc.

• Implementing COVID SOPs in stores – With stores opening up again, businesses need to ensure that every individual within the store is behaving responsibly. Stores need to limit the number of people inside, ensure adequate social distancing, check for face masks, provide sanitizing stations, and ensure overall cleanliness. Depending on the resources, businesses can even take things up a notch by providing self-payment checkouts.

In the future, store designs may also need to undergo some changes. The numerous clothes racks seem like a labyrinth, and over-crowded places will induce anxiety. Pandemic fears will last for a long time, so retailers will have to think of ways of redesigning their stores.

Conclusion

The current pandemic crisis has shown, once again, the importance of having an online presence.

While no brands were prepared for the changing climate, fashion retailers with eCommerce stores continued to score sales, bearing little damage to their revenue.

Even though we can’t be sure of how the shopping environment will look in the future, no industry branch will be able to neglect eCommerce anymore. Many buyers might go back to buying from physical stores once all of this is over, but having an online store will no longer be an option.

But a necessity.

The new normal will require additional flexibility and agility. Those who adapt fast will come out much stronger out of these trying times.