The apparel segment continues to be the worst hit in retail due to COVID-19 as store closures and virus-wary consumers’ have severely dented the seasonal spending. Furthermore, the rising unemployment and threat of a global recession will exacerbate the contraction of the consumers’ expenditure on apparel. 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, says GlobalData, a leading data and analytics company.
GlobalData forecasts that COVID-19 will wipe off US$ 395.6 billion from global clothing and footwear sales in 2020, a 19.5 percent decline on 2019. The loss of clothing and footwear sales is highly significant as it is equivalent to 29.1 percent of the US$ 1,361.7 billion of total sales lost by the overall retail industry in 2020.
Similarly, Asia-Pacific (APAC) post-COVID-19 forecasts for clothing and footwear sector are US$ 95.4 billion lower compared to its pre-COVID-19 forecasts for 2020, responsible for over 16.3 percent of the overall retail sales lost in the region in 2020.
The pandemic has changed the purchasing attitudes of consumers. Most consumers declare that trust is an important factor when purchasing products, with 60 percent of consumers stating that trustworthiness, risk-free and familiarity are factors influencing their choices of products/services, according to the GlobalData’s COVID-19 Tracker Survey: Global Week 1,5,10 (March 25-31, April 21-26, May 26-31, 2020). The survey covered 5,500 respondents across Australia, Brazil, China, Germany, India, Italy, South Africa, Sweden, the UK, the US and the UAE.
Vijay Bhupathiraju, Retail Analyst at GlobalData, comments: “Brands need to continuously engage with consumers through social media channels and personalized 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.”
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 concludes: “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.”