Views by – Mr. Vishnu Govind , Mentor & Brand Consultant
The current Covid-19 situation has disturbed one and all. We haven’t faced an issue of such global ramifications since World War II. What we are seeing is a different kind of battle, one in which we are united in our fight against a common enemy. With social distancing being the priority, needless to say, business operations have been hit. Consequently, profits will diminish and so will the ability of businesses to pay their employees, as a result of which there will be certain level of uncertainly in different sections of society. The economy will be in a recessionary state and different sectors will be affected differently.
The pandemic will have its impact on the fashion retail sector too. Globally, even with a generous dose of optimism, the growth outlook for 2020 is not great. There are different projections and putting a number on it is not the idea behind this article. Here, we are discussing about the challenges that we would face and the steps that should be taken. While it is clear than consumer demand will be affected, the industry operations that fulfill this demand will be challenged significantly. Big fashion brands have achieved globalized sourcing efficiencies with supply chains that cut across international borders. In the chain from fiber to fashion, right from sourcing the basic ingredient, and then the conversion to yarn, to fabric, to garment, then the last mile delivery to the store, followed by the activity of selling the merchandize in an ambience that is appropriate for the brand, there is labor involvement, human contact and decision-making processes for different stakeholders. Touch and feel is key for this category, and many processes in the supply chain involve hand feel of the fabric, which is not ideal for a work from home system. Fashion merchandising is a seasonal activity; major business houses in India follow two seasons- Spring-Summer (SS) and Autumn-Winter (AW). The cycle time from ideation to manufacturing to retailing is long, and the timeline planning has been rendered astray by the current situation, not to mention the sale loss due to the shut down.
As we practice social distancing, people are encouraged to stay at home. This is a situation we have not seen before, and it is difficult to predict how long things will be the way they are. Once the spread of the contagion subsides, when the Corona curve starts taking a downward gradient, markets will start opening. The situation will get relaxed in phases; however some things may not be back exactly to the way they were before, especially with respect to having social events, being part of public gatherings etc. Fashion is very much an element of the social part of our lives, and social distancing doesn’t go very well with the dynamics of being a fashion consumer. This cautious optimism has to be viewed in the context of uncertain income levels. The industry needs to be geared up for this eventuality.
So how do we expect the consumer behavior to look like once we open the markets and we are not holed up in our respective houses? Even in the pre-Covid days, with evolving fashion trends, more and more brands have been gaining scale and snatching share from established players; this situation with the Corona spread has complicated matters even more for these business houses. In the current lockdown mode we are in, only essentials are being sold. As we come out of it, it will signal a sigh of relief for businesses. However, we can expect a tough economic situation and the value-seeking Indian consumer will seek even more value from brands. Fashion being a discretionary element in our shopping agenda, will have to bear some brunt from this downturn. Indian market is price-sensitive; we love the discounts we get, and now we will seek even more price advantages. This will add to the challenges of brands that were already grappling with margin delivery issues.
Businesses with an online service model will be hoping to get an upside in the days to come. The past few years have seen a surge in online influence in the branded fashion market in India. This impact is felt in online shopping as well as offline shopping that is influenced by a digital search. We can expect an increased tendency in digitally savvy consumers to do online purchases in the post-Covid days. The past few days have seen us embrace new work practices that were hitherto seen as sub-optimal. Working from home and video conferencing are now becoming mainstream corporate practices; these are ideas and concepts that had made sense earlier also, but the adoption of these practices were slow because of inertia of continuity; and now the pandemic has accelerated the shift in their direction. In the Indian context, online selling has strong association with discounting, and in the current situation, we can expect increasing propensity to engage in online shopping as well as discounting. With both these trends co-existing, we could see prices being driven further downwards.
The immediate goal of businesses will be to adjust to the reduction in demand on an immediate basis. Businesses would have fixed costs which are incurred on the basis of certain revenue estimates; this would need a sudden adjustment. This could affect people; hence there is a need to take decisions with a human face. It is important to stay in the game; once there is clarity on that route, it is necessary to adapt to the requirements of the new normal. You may need to make shifts in channel priorities, geographical reach, or even explore strategically adjacent spaces. Changes will be needed in business processes also. Right from range planning, to shortlisting, sourcing and tradeshows, the process is people-intensive. The current situation might just catalyze the advent of technology-driven changes like AI-based solutions, online approvals, and re-ordering mechanisms etc. in leading firms.
This pandemic is something that came out of the blue. It is testing us now, for it is a great teacher. It is pushing us to do things we would have postponed, while driving us towards meaningful activities. There is a disturbance and it will lead to a shake up. For leaders, the lives and livelihood of employees must be paramount in this difficult hour. From a business perspective, it is about reorganizing to get through this phase, and then about being adroit with innovations so that they could bounce back.