The global fashion industry, valued at over US$2 trillion, has been hit extremely hard by the worldwide spread of Covid-19, resulting in business closures, loss of jobs, and plummeting sales throughout the whole supply chain.
As consumers around the world stock up on toilet paper and hand sanitizer, there is little need for splashing the cash on new clothing and accessories when your only trip out of the house is probably once a week to the nearest supermarket.
The fashion industry relies heavily on strong levels of consumer confidence, days out at the mall, and social occasions for people to show off their new looks. As long as this pandemic continues, consumers around the world are going to be staying at home, feeling worried and fearful of an extremely uncertain future. This essentially removes all of the factors which are needed for businesses in the fashion industry to turn a profit.
According to a report by Business of Fashion on the impact of the coronavirus so far, stock prices for global fashion brands dropped almost 40 percent in the first three months of the year. This demonstrates the lack of business confidence in the industry as it is a much steeper decline than many other industries despite falls across the whole stock market.
The report goes on to estimate that revenues for the industry are likely to decrease by 27 to 30 percent compared with 2019. Luxury brands are expected to be hit the hardest, with revenues predicted to drop by as much as 39 percent.
This contraction in revenue is extremely significant, and with many fashion companies already struggling in what is a very competitive and volatile market, it is expected that a large number of companies around the world will go bankrupt in the next 18 months.
THINK LIKE AN ECONOMIST!
- Explain why the demand for fashion items is decreasing.
- Explain why the fashion industry is described as competitive and volatile. Do you agree?
- Assess the impact that the spread of Covid-19 is likely to have on luxury brands.
