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The Bank of England needs to take a balanced judgement of whether negative interest rates would help the economy to deal with the coronavirus crisis, according to its deputy governor.

Ben Broadbent said cutting the base rate below zero, after it was reduced twice in March from 0.75pc to 0.25pc to 0.1pc to stem the "sharp and large" economic shock of the virus, could stimulate demand but also "do more harm than good" by having implications for banks whose lending is crucial for the economy.

Negative interest rates are intended to encourage lending - and therefore business investment and consumer spending - by punishing banks for leaving excess cash with the central bank.

The European Central Bank launched negative rates in 2014, cutting its deposit rate to -0.1pc, and the Bank of Japan introduced them in 2016, partly to prevent a rise in the yen harming its export-reliant economy.

"We keep under review all our potential policy tools and this is a question that's been thought about on and off since the financial crisis and it's a balanced judgment," Mr Broadbent said.

Since the pandemic began, in addition to cutting rates the Bank has announced £200bn more in quantitative easing and provided direct funding to companies in need of working capital, as well as billions of pounds of liquidity for the financial system.

The federal funds futures market on Friday was pricing in negative interest rates of about half a basis point in April 2021 in the US, indicating the market expects rates could go this low, although the Federal Reserve has said this is a scenario it wants to avoid.

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Bank of England keeps negative interest rates under review

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The Bank of England needs to take a balanced judgement of whether negative interest rates would help the economy to deal with the coronavirus crisis, according to its deputy governor.

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The congestion charge in London is to increase by 30% next month and will be enforced seven days a week, as the mayor of London struggles to pay for the transport system.

The government has confirmed a £1.6bn bailout of Transport for London (TfL) after fares income fell by 90% in the last two months.

Mayor Sadiq Khan has accused the Department for Transport (DfT) of "making ordinary Londoners pay the cost for doing the right thing on COVID-19".

City Hall said the congestion charge will rise from £11.50 a day to £15 from 22 June. The hours of operation are also being extended to 7am to 10pm, seven days a week, instead of just weekdays.

The charge was waived during lockdown when the majority of people living in or around London were working from home or only travelling for essential reasons.

However, the £11.50 charge will be reintroduced on Monday 18 May, along with the ultra low emission zone which costs £12.50 for most vehicles and £100 for heavy lorries or coaches.

The mayor's media office said the June increase will "encourage Londoners not to make unnecessary car journeys, and is expected to reduce journeys within the congestion charge zone by a third".

TfL will temporarily extend the congestion charge reimbursement scheme for NHS and care home workers.

However, it has introduced other temporary measures such as stopping free travel for children and only allowing people over 60 or with a disability to travel for free outside peak hours.

Fares on buses - scrapped to help protect drivers from COVID-19 - will also be reintroduced.

The Department for Transport said the bailout means TfL will be able increase bus and Tube service levels "as soon as possible to ensure people can follow social distancing guidelines while on the network".

Concerns have been raised about packed Tube trains and buses this week after the prime minister encouraged people in England to go to work if they cannot work from home.

A London COVID-19 task force - featuring representatives from the government and TfL - has been established to oversee operational decisions during the pandemic.

Mr Khan said: "COVID-19 poses the biggest challenge to London's public transport network in TfL's history. It will take a monumental effort from all Londoners to maintain safe social distancing on public transport as lockdown restrictions are gradually eased.

"That means we have to keep the number of people using public transport as low as possible. And we can't see journeys formerly taken on public transport replaced with car usage because our roads would immediately become unusably blocked and toxic air pollution would soar.

"I ask that Londoners do not use public transport unless it is absolutely unavoidable - it must be a last resort. If you can work from home you should continue to do so. We should all spend more of our leisure time in our local areas too.

"We will need many more Londoners to walk and cycle to make this work. That's why these plans will transform parts of central London to create one of the largest car-free areas in any capital city in the world."

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Coronavirus: London's congestion charge to rise 30% next month after huge TfL bailout

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The congestion charge in London is to increase by 30% next month and will be enforced seven days a week, as the mayor of London struggles to pay for the transport system. The government has confirmed a £1.6bn bailout of Transport for London (TfL) after fares income fell by 90% in the last two months.

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WUHAN, CHINA - MARCH 30 2020: Masked staff pose for a photo in a shop of luxury goods in a high-end ... [+]
Barcroft Media via Getty Images

Since the 2008/2009 recession, China has effectively become the tail that wags the dog of the global luxury market.

That's because China was largely unaffected by the economic downturn that battered the market throughout the rest of the world. Not only that, Chinese consumers, with their growing economic power, expressed a heady appetite for luxury brands that signaled status in a culture where that really mattered.

Now after the beating luxury brands have taken due to the coronavirus pandemic, which Bain and Company predicts will strike off 20% to 35% of the personal luxury goods market in 2020 and McKinsey is on record for sales to shrink as much as 35% to 39%, all eyes are on the Chinese to restore luxury brands' fortunes.

In analyzing prospects for the luxury market's recovery, Bain's latest report takes a glass-half-full view of the industry's future. It predicts the industry will recover by end of 2022 or early 2023 to 2019 sales levels of €281 billion ($304 billion).

And to do that, China is the industry's only hope, says Claudia D'Aprizio, Bain partner and leader of its luxury goods practice.

All eyes on China

"The economy in China will be the one that will be least impacted by the long tail of this planetary crisis," D'Aprizio told me. "For the luxury market, we think the recovery will be stronger and faster in China than in the U.S. and Europe."

Already Bain reports the "best-performing brands" are registering year-over-year sales increases in China for the first four months of 2020. While store traffic remains down, consumers who visit are reportedly more inclined to buy and their level of spending has increased.

Having grown dependent on the Chinese market for growth - or more correctly addicted - luxury brands are going to have to keep the pressure on to reach that ambitious 2022/2023 recovery schedule.

In 2019 Chinese consumers alone accounted for 90% of the growth in the personal luxury goods market or some €19 billion ($21 billion) in sales. They also generated 35% of global luxury spending.

By comparison, American consumers generated only 22% of the industry's sales and Europeans 17%, and their share of the market has declined from 27% and 30% respectively since 2000, while China's share has grown from 2%.

Further, Bain expects that Chinese consumers will make more than half of luxury goods purchases by 2025 when global sales are expected to reach €320-330 billion ($346-357 billion). That means they would have to gain some 15% more market share in only five years, a pretty aggressive expectation.

D'Aprizio admits predicting the future for luxury coming out of this crisis is particularly problematic since it impacted not just consumers' financial wellbeing, but their health and emotions. "It's probably going to have more than double the impact that the industry had from 2007 to 2009," she says.

What can get luxury brands off course in the post-coronavirus world, even if China rebounds as strongly as Bain expects? Plenty.

Travel to and from China will be stalled

First, nobody's going anywhere, as the travel industry will be the very last to recover.

"About 40% of overall [global] sales are made when people are traveling, so that is something that will be slow to recover," D'Aprizio shares, as she predicts "repatrization of purchases" in China will offset losses due to reduced travelling as the government is "pushing" for more local consumption.

On-the-go Chinese consumers have been big luxury shoppers. Luxury sales in mainland China made up only 11% of global sales in 2019, compared to Chinese consumers' 35% total market share.

Reduced Chinese consumer spending power

Second, luxury brands are counting on Chinese consumers to have not just the same appetite for their pricey goods, but also the same spending power. That is to be determined.

The Chinese economy contracted 6.8% in the first quarter 2020, with industrial production down 1.1% and imports/exports off 6.4%.

Since China's factories feed the rest of the world's markets and the coronavirus shutdowns and resulting canceled orders didn't happen until the second quarter elsewhere, it may be a long shot to achieve the expected 1.3% year-over-year growth in the second quarter.

Complicating matters further is rising Chinese unemployment. CNN Business reports that as many as 80 million Chinese workers are out of a job, while the official figure from government sources are far lower.

Calling "data from Beijing notoriously opaque," CNN quotes economists at Société Générale reporting that nearly 10% of people in China are jobless.

Rising unemployment may hit luxury brand performance in China harder than in Western markets. "A lot of the luxury market depends on the aspirational drives of middle-income Chinese consumers. But if they lose that income, the luxury market will lose those customers," Luxury Daily's Mickey Alam Kahn shares.

Consider also that the U.S. has four-times more truly wealthy consumers than China, 18.8 million millionaires compared with 4.4 million in China.

Luxury retail post-coronavirus won't give the same emotional kick

Third, what D'Aprizio calls the "selling ceremony," which is so important to Chinese consumers, will be disrupted by social distancing measures required in the post-coronavirus world.

"There is an element of cautiousness and fear linked to the possibility of contagion which will reduce store traffic. The sanitary control measures required are not the best setting for luxury shopping which has a huge emotional element," she says.

She also foresees fewer luxury store openings which will put more emphasis on e-commerce, as well as the need for greater marketing efforts.

"Luxury brands will have to pull all the marketing levers and make investments in the most efficient way," which will likely result in a hit to brand's profitability down the road.

Rising cultural tensions as localism gains ground

Fourth, and perhaps most importantly, the coronavirus is going to heighten "cultural sensitivities" in the luxury market.

"There is a lot of tension around inequalities, especially among the lower-income tiers of the population," D'Aprizio shares. And it's not just tension between the have's and the have-not's but also the tension between the East and West.

As Western luxury brands have focused on the Chinese consumers for growth, they have committed any number of mistakes reflecting gross cultural insensitivity, like the notorious Dolce & Gabanna campaign featuring a model eating pizza with chopsticks.

While D'Aprizio lauds the luxury industry as the "melting pot of creativity everywhere," she also foresees the "danger of strongly increasing local sensitivites," arising from the coronavirus pandemic, which originated in China and already is a point of sensitivity for the Chinese people.

"Brands really need to pay attention to elements of the monocultural reality and try to be relevant with authenticity around local cultures and local sensitivities," she says.

It is important to note her emphasis on local cultures and sensitivities because both China and Hong Kong are important markets for luxury brands, yet they have cultural differences, challenging a one-size-fits-all-China approach to these markets.

Coronavirus is going to accelerate a trend that Bain defines as cultural relevance and local tribes.

"There has been a social strengthening of localism and nationalism," she shares. "In particular the younger Chinese consumers are developing a stronger demand for Chinese products, local brands and local enterprises. This will probably accelerate and be a threat for European brands."

To meet this shift, D'Aprizio calls on luxury brands to develop a "global framework that is large enough to accommodate all these differences and all the differing cultural needs," she says, and continues, "Luxury brands will need to make room for more collaborations with local designers, artists, and creatives to gain relevance around this trend toward strong localization."

Generational shift

In closing, D'Aprizio sees hope, and challenges, on the horizon not just in China but around the world coming from the next generational shift in the luxury market, from Baby Boomers and GenX consumers to Millennials and GenZ.

"These are both the luxury consumers of today and tomorrow. They are a wave shaping and creating luxury brands' evolution in terms of messaging and purpose," she concludes. "I see these consumers as a very positive underlying driver for success, as long as brands stay in tune with the next generations."

"As long as" is an important qualifier in that statement and many brands have tripped up staying in tune with consumers' aspirations and drives when generations shift.

... Read More

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Fate Of Luxury Depends On China, But Continued Success There Is Not Guaranteed

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Since the 2008/2009 recession, China has effectively become the tail that wags the dog of the global luxury market. That's because China was largely unaffected by the economic downturn that battered the market throughout the rest of the world.

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Fashion and luxury face $600 billion decline in sales

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Consulting firm BCG has revised its initial estimates and expects a drop in luxury sales between $85 and $120 billion in 2020, up from its first $40 billion forecast. China is showing positive signs of recovery, but domestic demand might not be matched by supply as luxury production remains on lockdown in Europe.

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As business leaders worldwide grapple with the COVID-19 pandemic, the health and well-being of their employees and customers must be the top priority. Already, apparel and fashion companies have put their assets to good use in the crisis, be it by turning over their factories to make face masks or hand sanitizer, donating products and services to healthcare workers, or helping employees find temporary roles with companies that are hiring. Ensuring that the business can survive and thrive after this unprecedented shock is crucial as well, as our colleagues emphasize in a recently published article, " Safeguarding our lives and our livelihoods: The imperative of our time." (For the latest insights on the pandemic, see McKinsey.com/coronavirus.)

In North America, the apparel, fashion, and beauty industry generates approximately $600 billion in annual revenue and employs more than four million people. Apparel and fashion companies must act quickly to secure business continuity, minimize downside for the latter half of 2020, and get ahead of business-model changes that may be necessary coming out of this disruption.

This article has four objectives. First, we examine COVID-19's impact on North America's apparel and fashion sector-and the near-term outlook in light of consumer sentiment and lessons from other regions. Second, we recommend a set of urgent actions to secure business continuity. Then, we look at medium-term actions to take during the recovery to minimize the downside for the latter half of 2020. Finally, we explore longer-term actions to position companies to succeed in the postvirus business environment.

COVID-19's impact: A fundamental reset or a painful but short blip?

While the apparel and fashion industry, particularly in the US market, has faced challenges in the past decade (because of a combination of recession aftershocks, increased promotional intensity, channel shifts, and an excess of real estate), it has been on a path of steady if slow growth over the past three years, with value and off-price formats being rare bright spots.

Today, the situation is dire. Based on current positions for earnings before interest, taxes, depreciation, and amortization (EBITDA), 75 percent of publicly listed apparel and fashion companies in North America could find themselves with negative EBITDA or untenable net debt-to-EBITDA ratios after three-month store closures. Depending on their cash positions, these companies will be in deep financial distress unless they take urgent action (Exhibit 1).

While it's too early to quantify COVID-19's toll on the fashion sector, the pandemic has certainly shaken some of the industry's foundations:

Offline retail had already seen massive declines in sales and traffic at the start of the crisis-and now both have gone to zero. Across North America, retailers are shuttering their doors for consumer and worker safety or in compliance with government orders. Recent announcements suggest no assumptions of normalcy until the end of April 2020 at the earliest. For many brands, the store closures are coming on the heels of disappointing sales in the fourth quarter of 2019 as well as traffic declines in February 2020. Compounding the problem is the fact that North America is "overstored": the United States has almost 24 retail square feet per person, whereas Germany, for instance, has just slightly more than two. Most concerning of all is the plight of retail workers, many of whom (as of this writing) have been promised at least two weeks' compensation for scheduled shifts-but stores are unlikely to reopen within that time frame. Some retailers are exploring furloughs rather than layoffs; we are also seeing retailers furlough or reduce pay for corporate employees, as a way of showing solidarity with field workers and as a cash-saving measure. In the meantime, the number of Americans seeking unemployment benefits is expected to increase precipitously in the coming weeks.

Online retail is not keeping pace. While consumer engagement with apparel and fashion brands may be up at this time-as more consumers find themselves at home, idly scrolling through social media-that traffic is not translating to conversion. Even retailers with higher online penetration, such as direct-to-consumer specialty-apparel players, face challenges as consumers pull back on discretionary spending. Many retailers report that e-commerce sales two weeks ago were flat compared with the same period last year and down 20 percent last week. They anticipate further declines of 30 percent or more this week. These numbers track with what apparel retailers elsewhere in the world have experienced. Retailers with a heavier concentration of in-store sales (such as fast-fashion retailers and midtier department stores) face even greater pressure to drive consumers online and rapidly scale e-commerce operations. Furthermore, the fulfillment of online orders risks disruption, whether through reduced staffing because of illness, physical distancing, site cleaning, or even distribution-center closures under state decree.

Promotion is a potential 'needle mover,' but it is nearing its limits. Unsurprisingly, retailers are heavily discounting spring and summer 2020 inventory. The specialty-apparel and department-store channels have already reached peak promotional frequency online, so it will be difficult for brands to break through with clear, differentiated offers that stand out to consumers. Messages about flash sales, savings of 50 percent off, and buy-one-get-one deals will be lost among a sea of similar emails and digital ads, which can drive conversion but will become unmanageably expensive for retailers, given the surge in online traffic. In such an environment, brands must continually evaluate the effectiveness of different promotional offers, as there is risk of giving away margin, resetting customers' value expectations, and adversely affecting brand perception.

Consumer spending will continue to decline and may take time to recover. Sales data from Amazon show that growth in apparel sales fell by an average of 40 percentage points between mid-February and mid-March (Exhibit 2). "Indoor" fashion categories, such as pajamas and activewear, fared a little better-but they are highly fragmented and lower margin, with limited differentiation across brands. In a March 20-22 survey of US consumers, 63 percent of respondents said that they expect to spend less on apparel than they usually do. If the shape of the recovery in North America mirrors that of China, it could be midsummer before spending and shopping behaviors begin to return to "normal."

The apparel industry has repeatedly proven its ability to reinvent itself and adjust to where, what, and how consumers buy. We believe in the North American fashion sector's long-term potential. That said, sector averages cannot predict the destiny of an individual company. In the remainder of this article, we recommend actions for apparel and fashion companies to take. Some of these actions will mitigate risks across the industry, particularly for those retailers and brands that entered this crisis with lower levels of cash on hand. Other actions will help leaders pull further ahead. A company's ability to execute both types of actions, in a bold and timely manner, will determine whether it will emerge stronger from the crisis.

Navigate the now: Immediate priorities

While CEOs should stay abreast of how the situation evolves, there is a clear set of actions-ideally, coordinated by a COVID-19 nerve center -that companies should implement now, without hesitation.

Lead with compassion and protect your people

Communicate frequently and clearly with employees. Set expectations about the new working norms, safety precautions being taken, and cadence of communication; build morale by creating informal opportunities for connectivity and by being open about challenges (including personal ones); and, when possible, make empathetic offers of assistance or time off to support employees' well-being. The health and safety of employees-at headquarters and in the field-is the absolute priority, requiring solutions that can be technological (such as remote working) or practical (such as staggered shifts). Protecting customers, another top priority, involves introducing new processes and policies, such as strict hygiene practices in stores and new safety procedures for handling and delivering online orders.

Manage for cash

Set up a "cash control tower," with representation from both the procurement and sales teams, to examine spend and identify potential reductions in cash outflow. Work closely with authorities to find ways to alleviate cash strains via public measures, potentially on a state-by-state basis.

Review your in-year inventory position and assess the supply chain

Quickly review your full-year 2020 buys, category by category, making decisions based on "fashionability" (basics or evergreen products versus on-trend products), depth of buy, and confidence in style. Beginning with the spring and summer inventories, determine which products could be delayed for late summer and fall or 2021, even if in an outlet channel. Some products might also be sold in flash sales during the holiday period, depending on availability of storage space. Clear all other spring and summer products as quickly as possible to improve cash position (Exhibit 3). Managers will need to adjust buy quantities for the fall and holiday seasons, accounting for first-half carryover and any expected category shifts.

As your company and other retailers reset inventory positions, you should be cognizant of the knock-on effects on brands and upstream manufacturers that are already under pressure because of decreasing unit volume in some channels and categories. Be transparent in your communications about payment terms. Support your long-term partners by consolidating volume and engaging in joint planning.

Amplify digital

Accelerate investments to enhance your digital presence and shift media spending to the online channel. These efforts should primarily apply to your own websites but may also pertain to partnerships with e-retailers or with wholesale partners that have stronger e-commerce businesses. Revisit the logic of your marketing investment: shift from brand building to customer activation, focusing on conversion, basket building, and repurchase triggers. Digital marketing will play a fundamental role in not only maintaining engagement and boosting online sales, but also enticing customers to visit stores in those geographic markets when stores reopen.

Maintain connections with consumers

Just as consumers continue to seek connections with one another during this crisis, apparel and fashion companies must continue to engage consumers as well, even if those consumers are not spending. This must happen in a way that is authentic to the brand and resonates with its consumer base. For some companies, that may mean communicating to consumers why it is still safe to shop online and how the company is ensuring that warehouse workers stay healthy. For others, it may mean sparking candid conversations about how something as seemingly frivolous as a new pair of shoes or a new tube of lipstick can bring comfort and joy in a time of chaos. This is a time to use your brand voice to speak to consumers and forge community around your brand.

Plan the comeback: Medium-term actions for 2020

Beyond the immediate "must-dos," certain actions can help companies minimize the downside and maximize opportunities in the latter half of the year. The following steps apply to most enterprises, with variance dictated largely by the size of the store network.

Prepare to reopen stores and drive traffic

Make thoughtful, store-by-store decisions as you reopen the store network, not only to safeguard the health and trust of employees and consumers, but also because most enterprises will be operationally constrained. You might decide that certain stores should reopen in a very different capacity-for example, serving a more value-oriented consumer segment and helping to clear excess product-or shouldn't reopen at all.

We expect that most retailers will pursue a region-by-region approach to reopening stores: a gradual ramp up in staff (particularly if rehiring is necessary after an extended closure), digital engagement with loyal customers to invite them back to stores, testing of localized promotions, and compliance with local requirements (with regard to cleaning practices and store density, for example). Consumer behavior and preferences may have changed during the crisis, so forward-thinking retailers will reopen with a new operating model centered around customer engagement and styling (for example, floor-space resets to facilitate seamless in-store pickup of online orders, and scannable products that connect shoppers to online product reviews).

Reassess merchandising plans for fall 2020 and spring 2021

Weeks of shutdowns will almost certainly alter the shape of the recovery for the apparel industry. We expect continued telecommuting, reduced travel, and cancellation or postponement of special events (such as weddings and music festivals). We also expect upstream impact, with significant changes in sourcing and production. Garment manufacturers in Bangladesh, for instance, have already seen $1.5 billion in canceled orders from Europe and North America.

Brands should monitor sales data and exchange insights with their vendors and suppliers, then review their merchandising plans for the fall and holiday 2020 and spring 2021 seasons. Consumers have been trying new brands and new categories during this crisis, so-for brands and retailers with resources to invest and the willingness to take risks-there could be opportunity to acquire new consumers.

The apparel industry has repeatedly proven its ability to reinvent itself and adjust to where, what, and how consumers buy.

Connect with brand loyalists

Look to your most loyal consumers first to jump-start growth. It's not uncommon for 10 percent of a brand's consumer base to drive 60 percent of its sales, making activating these VIPs a must-do. These consumers will likely be inundated with other brands' offers, so you will need to set the bar high to stand out; personalization will be the best way to do that. Tailored promotions, early access to new-product drops or limited editions, and invitations to VIP-only experiences can be effective levers. At the same time, many consumers might be in a different financial position than they were before the crisis. Detailed consumer segmentation and personalized promotions (not just discounts, but offers that deliver meaningful value) will be crucial for retaining your loyalists.

Shape the 'next normal': Longer-term strategic actions

CEOs should look beyond epidemiology and sales data to formulate a view on how the COVID-19 pandemic will reshape their ecosystems and how their companies might capture new opportunities. The following longer-term actions deserve management consideration.

Map a strategic journey to financial resilience

Crises can create new avenues for growth. Companies will have entered the crisis from various positions of strength, so go-forward opportunities will be, to some extent, bound by starting positions. But all companies would do well to take a hard look at the portfolio: Are you playing in the most attractive spaces and channels? Are you set up to execute effectively to capture demand? Is there an opportunity to consolidate or acquire brands, assets, or capabilities at attractive multiples that would allow you to better serve your core customer? There will be important choices about what brands, partnerships, and organizational changes to pursue-but also about what not to pursue. The crisis is poised to precipitate a massive shakeout, and the players that ask and answer the tough questions will be better positioned to revive their business.

Build your operating model around digital and become truly omnichannel

While, in the short term, a demand shock has driven a decline in online conversion and sales, we believe that in the longer run there could be permanent shifts in consumer shopping behavior that push more traffic and categories online. For example, in China, new customer segments and markets have gravitated toward e-commerce; the same could happen in North America. Retailers could see a broader adoption of e-commerce among previously underpenetrated categories (such as lingerie) and consumer segments (such as baby boomers and even Generation Zers who, according to recent McKinsey research, are more likely than millennials to go to malls).

Take this opportunity to leapfrog into the digital arena by making it the center of your operating model. Start by revising channel-mix targets and investment allocation to give a greater share to online channels. Accelerate personalization in digital marketing so that you can deliver the same quality of interactions online that consumers are accustomed to in stores. Explore new ways of partnering with e-retailers to gain growth momentum through their channels while protecting your brand equity.

Anticipate shifts in consumer sentiment and behavior

While no one can predict what the next normal will be like, we expect a strong desire on the part of consumers to resume their precrisis habits once conditions allow. Some themes that have begun to surface in our consumer research and in discussions with CEOs include the following:

All casual, all the time. Many people will return to a fundamentally different work environment-one in which telecommuting, flexible hours, and an emphasis on work-life balance are new norms. Comfort could become a top consideration in apparel purchases. The trend toward "casualization," which was already strong prior to the crisis, could further accelerate.

A focus on flexible supply chains, centered on 'made in America.' Many apparel and fashion companies will look to onshoring or nearshoring, as they begin to value a flexible supply chain over a low-cost one.

An evolution in clean beauty. There could be a shift in what "clean" means in beauty and personal-care products, as consumers increasingly emphasize product safety and quality over organic or all-natural ingredients.

It will be critical to keep a close eye on how your consumer base is changing and determine what that means for your brand.

There's no denying that the COVID-19 pandemic will make for a difficult 2020. For some companies, even survival will be a struggle. If, however, apparel and fashion companies lead with compassion and undertake bold actions, they can position themselves not only to weather the crisis but to emerge from it even stronger.

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Perspectives for North America's fashion industry in a time of crisis

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Leaders in the fashion industry must take quick action while also planning for post-crisis realities as millions of people in North America rely on them for their livelihoods.

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The retailer is searching for up to 400,000 sq ft of warehouse space in the Midlands on a short-term lease to help store £1.5bn worth of stock from overseas.

Primark is understood to have already leased up to 40% more warehouse space due to the coronavirus.

A spokesperson for Primark said: "We have made clear our intention to secure additional space to house product we are receiving from our suppliers. We don't comment on commercial arrangements."

Drapers has contacted Savills for comment.

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Primark seeks space to store excess stock

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The retailer is searching for up to 400,000 sq ft of warehouse space in the Midlands on a short-term lease to help store £1.5bn worth of stock from overseas. Primark is understood to have already leased up to 40% more warehouse space due to the coronavirus.

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Total retail sales in the UK plummeted 19.1% year on year in April, against an increase of 2.4% during the same month in 2019.

According to the BRC-KPMG Retail Sales Monitor, this represents the worst decline since records began in January 1995. This fall was sharper than the three- and 12-month average falls of 7.5% and 2.3% respectively - both of which were record declines in themselves.

Stripping out declines from stores that have been mandated to close by the government due to the ongoing pandemic, UK like-for-like sales rose 5.7%, primarily due to online sales growth.

Meanwhile, online non-food sales increased by 57.9% in April, against a growth of 4% in April 2019. This is above the 12-month average growth of 8.5%.

Helen Dickinson, CEO of the BRC, said: "With lockdown measures in full swing, April saw a record fall in retail sales. For many non-food goods, such as clothing, footwear and large household items, the decline was particularly steep as consumers responded to lockdown conditions.

"The proportion of goods purchased online rose sharply, with products such as games consoles, bicycles, office equipment, and haberdashery, all high on the list. However, even the dramatic rise in online sales could not make up for the loss of instore purchases. Coronavirus has accelerated many of the trends seen prior to the outbreak and it is likely that as the lockdown wears on, these new shopping habits - such as the trend towards online purchases - will become more entrenched for many consumers."

She added: "While retailers have a lifeline through various government loans and support, they need to know this will continue beyond the current deadlines. Government should also step in to support on rents for those retailers still facing rent costs, despite little or no sales. Without this, businesses may be forced to close - threatening jobs and further harming local communities. Monday's Recovery Strategy was an opportunity missed to provide a clear and detailed roadmap, outlining when and how shops will reopen after the 1 June, so that retail can help get the economy moving and the public can get all the goods they need."

Paul Martin, UK head of retail at KPMG, said: "With the nation firmly under lockdown throughout April, drastic retail sales declines were to be expected. Total sales fell a staggering 19.1% compared to last year - eclipsing any previous fall since records began - but that pain hasn't been felt equally. So few physical stores, or indeed retailers, were open for business in the month, making like-for-like comparisons hard to establish, but the ability to continue trading or leverage online channels was beneficial for the fortunate few though.

"Aside from 'essential' retailers still operating physically, consumers have had little alternative but to log-on, and online sales were up nearly 60%. As you'd expect with consumers staying at home, the focus has been on home-related goods, as well as trying to keep entertained. Computing equipment, household gadgets, as well as toys and baby equipment were among the categories that performed strongly. Meanwhile, other non-food categories, especially fashion, experienced a significant decline.

"The disparities in retail continue, not only between 'essential' and 'non-essential', but also between those with an online channel and those without. Eyes are firmly fixed on how the easing of restrictions will impact consumer spending going forwards, with the acceleration of online sales likely here to stay and overall demand in certain categories, like fashion, remaining subdued for some time."

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Retail suffers another record sales fall

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Total retail sales in the UK plummeted 19.1% year on year in April, against an increase of 2.4% during the same month in 2019. According to the BRC-KPMG Retail Sales Monitor, this represents the worst decline since records began in January 1995.

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LONDON, United Kingdom - Predicting China's economic future just got a whole lot harder. The country's National Bureau of Statistics revealed last week that its $14 trillion economy shrank by 6.8 percent in the first quarter of 2020 - making it the first contraction since quarterly GDP records began decades earlier. The news brought Covid-19's dramatic impact on the world's largest luxury market into sharp focus and gave executives pause for thought.

Just hours before the news was released, LVMH's Chief Financial Officer Jean Jacques Guiony reported an uptick in demand from mainland China, with sales up 50 percent year-over-year in early April, during the group's first quarter earnings call. However, now there is concern among luxury executives that earlier positive momentum could be thwarted by a dent in consumer confidence.

Will previously bullish Chinese shoppers who have never witnessed a period of economic decline in their lifetime suddenly become more restrained with their spending - or even tighten their belts?

"Chinese consumers will react the best to this crisis [compared to consumers in other international markets]," Mario Ortelli, managing partner at Ortelli & Co, told BoF. But whether "the best" will be good enough for luxury brands to avoid a prolonged and painful recovery remains to be seen.

Since China emerged from its two-month-long lockdown, business leaders have looked to the nation's shoppers for clues on how the crisis will play out. And as companies' balance sheets showed promising signs of a Chinese rebound, the market became a beacon of optimism in the face of bleak macroeconomic forecasts elsewhere around the world.

But even before China's economic contraction cast a dark shadow over the market horizon, the mainland's idiosyncrasies - from its unique consumer culture to its fast-paced, insular tech ecosystem - meant that its effectiveness as a bellwether for global luxury performance was limited.
An Imperfect Barometer
Mainland China's importance to the luxury sector can't be overstated. According to Bain & Company, Chinese customers accounted for 90 percent of the constant growth of the market in 2019, reaching 35 percent of the value of luxury goods. The mainland's overall contribution to the global luxury market totalled €30 billion last year (approximately $32.6 billion).

Despite China's Q1 contraction, a range of factors - like its unemployment rate, which improved slightly in March after a record-making high in February - suggest that the worst is over. Some business leaders remain optimistic about growing short-term demand for high-end goods in China - the first major economy to attempt a restart post-lockdown.

"A lot of the companies I am talking to are doing 70 to 80 percent of the sales they were doing last year at this time, which is pretty impressive," said Amrita Banta, managing director at Agility Research & Strategy.

Following the peak of the luxury market's decline in China - which Erwan Rambourg, global co-head of consumer and retail research at HSBC, pegged at February 10 - its recovery is showing signs of a V-shaped trajectory.

The fact that sales in mainland China are up, even 50 percent, gives me little to celebrate.

Rambourg observed that while sales were down 80 to 90 percent two months ago, each week since has brought about a 10 percent improvement. He reckons that most brands are now likely growing year-on-year ( LVMH confirmed that key assets like Louis Vuitton, Dior, Sephora and have seen strong growth since mid-March) and should expect "much more impressive growth" in May and June.

But this - and LVMH's April uptick - needs to be taken in context, particularly where the group reported a 15 percent drop in first quarter revenue year-on-year. LVMH arch-rival Kering, which reports its first-quarter results on April 21, has warned of a similar decline across the board.

"One needs to look at sales by nationality, not at sales by geography," said luxury expert and Bernstein analyst Luca Solca. "The fact that sales in mainland China are up, even 50 percent, gives me little to celebrate."

Chinese consumers historically do about one-third to half of their luxury spending at home, preferring to buy while traveling outside Mainland China. But with global travel retail at a standstill, brands would need to see sales domestically double or even triple in order to recapture global spend, said Solca. LVMH's uptick therefore illustrates this reality. "There is no disconnect here, because Chinese luxury spend [overall] also seems to have contracted."

Moreover, not all companies will benefit from a rebound.

"Recovery will be totally uneven and differentiated among brands," added Ortelli, who forecasts that top-of-mind brands who set their budgets at over 20 percent annual revenue growth among Chinese consumers in early 2020 will close the year at 5 to 10 percent. Brands that banked on [mid-single digit] percentage growth could go into negative territory, he warned.

The crisis has and will continue to accelerate the re-shoring of China's luxury spending as consumers refrain from travelling and spending abroad, but it won't come cheap for brands. "If the repatriation that was supposed to appear over 10 years appears overnight, this will carry very significant adjustment costs," Solca said.

While Ortelli does recommended that brands with resilient Chinese demand allocate their marketing spend and inventory to the mainland, he suggests that companies should exercise caution as import taxes and a potential second outbreak could make it difficult to shift stock further down the road. "If we have a second outbreak in two weeks, everything changes again. This is a moving target."
An Asian Outlier
Referring to the fact that China was the first country to experience lockdown and the first to see it lifted, Nike's Executive Vice President and Chief Financial Officer Andy Campion suggested during an earnings call on March 24 that "our team in Greater China has given us a playbook for the rest of the world."

At that time, Campion told investors that the sportswear giant's Greater China business was already making strides from recovery into a period of normalisation, citing strong double digit (nearing triple digit) growth in the brand's digital business and the reopening of around 80 percent of its 7,000 local stores.

"We're also executing on this playbook in Japan and Korea," added Campion, noting that Nike planned to progress through the three phases (the third is a return to strong growth) on different timelines across global markets.

You have a very vertical V in China, [but] they'll have a very flat V in Korea.

Yet Japan has not emerged from the throes of its outbreak - its government on April 16 declared a nationwide state of emergency following a surge in confirmed cases. South Korea, however, could be a bright spot.

According to Rambourg, South Korea is the only other country that could follow China's V-shaped recovery lead. The South Korean government succeeded in flattening the country's virus curve dramatically without shutting down its economy. Consumer confidence has remained largely intact as a result, but a rally will likely be tempered as the economy's decline wasn't as steep as the mainland's.

"The rebound won't be as impressive," added Rambourg. "You have a very vertical V in China, [but] they'll have a very flat V in Korea." What's more, the luxury market in South Korea - though globally significant and influential - is nowhere near the size of China's.

More broadly, almost all of the G-20 economies will register a recession this year. In an update made by the Economist Intelligence Unit (EIU) on April 14, South Korea is now predicted to shrink by 1.8 percent in 2020 and Japan by 1.5 percent. In Europe, the figures range from a 2.6 percent contraction in Russia to a 7 percent contraction in Italy. Indeed, with economies as diverse as the US, Australia, Mexico, Brazil, Saudi Arabia and South Africa all in negative territory, the only countries in the group still predicted to register full-year economic growth in 2020 are India (2.1 percent), Indonesia (1 percent) and China (1 percent).
Travel Retail on Pause
Mainland China is still a recruitment market when it comes to luxury, meaning a significant proportion of its consumers are new to the segment and will have a more voracious appetite for high-end goods post-pandemic. The same can't be said for shoppers in the US and Europe. The country's avant-garde tech and e-commerce ecosystems - and the likelihood that lockdowns abroad will last longer than Beijing's two-month measures - make the odds of a V-shaped recovery in the West increasingly unlikely.

The recovery curve will differ for consumer markets that are still feeling immense pressure from local outbreaks and rely on mainland Chinese tourists to boost retail performance. Take Japan, Hong Kong, Singapore and European countries like France, Italy and the UK, which are either cautiously avoiding second outbreaks or in the midst of their first round of lockdowns.

Once tourists come back, it will benefit Europe - like it will benefit Hong Kong, Singapore and Japan.

According to Rambourg's estimates, mainland Chinese tourists account for two-thirds of sales in Hong Kong, over a third of sales in Singapore, and a third of sales in European hot spots. With global travel at a virtual standstill, travel retail spending has also been decimated. Brands like - which is highly exposed to travel retail demand and attributes over 40 percent of global revenue to Chinese shoppers - already warned of a dramatic hit to sales in March.

The EIU predicted that the eurozone will be hit hard by macroeconomic forces. While locals in France and Italy are unlikely to carry the burden of recovery by splurging on high-end items post-pandemic, an eventual resumption of tourism flows from China - which already happened domestically, with a 366 percent boost in the first week of April, according to Chinese travel service provider Ctrip - could make an impact.

"Once tourists come back, it will benefit Europe - like it will benefit Hong Kong, Singapore and Japan," Rambourg said. "You could see a swoosh recovery: not exactly a V, but a very progressive, very gradual recovery."

However, brands shouldn't expect this rebound to happen anytime soon. "It is likely that travel patterns will not go back to normal, not even [around the second half of 2020]," Solca told BoF.
A Luxury Laggard
Businesses in the US shouldn't expect their local market to follow China's trajectory or timeline as the US looks down the barrel of a 5.9 percent economic contraction this year, according to the IMF.

"The US will be the slowest, the longest to recover," predicted Rambourg. "You'll see a sort of L-shape curve, which means basically no recovery for a while."

American retailers won't benefit from a travel resurgence to the same extent or in the same way that cities across the Atlantic eventually will. Though research firm Tourism Economics estimates that the US economy could lose $10.3 billion in Chinese visitor spending due to Covid-19, HSBC estimates that less than 10 percent of the American luxury market is linked to tourism flows. "Luxury consumption in the US is mostly domestic with lower impact from tourists," said Ortelli.

Even before the pandemic, geopolitical tensions between Beijing and Washington, a strong dollar and the lure of other destinations saw Chinese stateside tourism drop by over 8 percent. Increasingly frequent reports of racism against Asian Americans could further discourage Chinese tourists from visiting and spending the US.

You'll see a sort of L-shape curve in the US, which means basically no recovery for a while.

It doesn't help that the US market is heavily influenced by the health of equity markets, which doesn't bode well for sales. Luxury demand will evaporate if the markets go down, but a stock market rebound often precedes a lag in demand where consumers hesitate to trust the economy, value of their property or their own job security, said Rambourg.

"The equity market, the real estate market, wages... it depends on all these factors," added Ortelli. "If the IMF is right and we're entering a recession, America will be hit hard and US luxury consumption will have a big shrink."

Though Chinese consumers will continue to drive global luxury growth, Ortelli recommends that brands make the most of what demand they do have stateside, across the eurozone and in China by analysing purchasing data across profiles like nationalities and age groups in order to target consumers with specific products and categories to maximum effect.

In the meantime, only brands who stay connected with shoppers - and double down on localisation strategies - will benefit from a rebound, Banta stressed. "It's not a transactional relationship, it's about staying close to your consumer, developing a relationship... In China particularly [they] have definitely returned to the brands who they are loyal to, who have remained respectful of the situation."
Additional reporting from Casey Hall. We're tracking the latest on the coronavirus outbreak and its impact on the global fashion business. Visit our live blog for everything you need to know. Related Articles: Caution: China's Luxury Rebound May Not Be What It Seems To Survive, Luxury Fashion Must Hibernate

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Luxury's Future Depends on China's Recovery. Will it Come Fast Enough?

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LONDON, United Kingdom - Predicting China's economic future just got a whole lot harder. The country's National Bureau of Statistics revealed last week that its $14 trillion economy shrank by 6.8 percent in the first quarter of 2020 - making it the first contraction since quarterly GDP records began decades earlier.

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Mango's automated centre consolidates the company's logistics, giving it more control over customer experience and product allocation.

The strategy is to speed up shipping and delivery times to better respond to trends as fast fashion gets more competitive.

Since opening the centre, Mango has tripled the number of garments processed per hour and can ship items within days.

LLICA D'AMUNT, Spain - Every item of clothing sent to Mango's 2,100 stores in 110 countries around the world first passes through the Spanish fashion label's new logistics centre in Llicà d'Amunt, a picturesque town outside Barcelona. Approximately 600 people work six days a week at the highly automated facility, where around 400 operations are machine-driven, to process items for store deliveries.

The company has so far invested €232 million in the 186,000-square-metre facility, which can stock up to 7 million hung garments and 20 million folded garments and accessories at the same time. It was completed in 2016 but became fully operational last summer. By incorporating the latest automation technologies, the centre is able to process 75,000 garments an hour, tripling the retailer's former capacity.

As soon as hung garments arrive at Llicà d'Amunt, they are unloaded onto one of nine automatic loading bays, which can process 27,000 garments an hour. Each bay is equipped with a classifier that separates the garments by size and style. They then travel along a 24-kilometre rail to be shipped out to stores or held in the warehouse. According to Mango, its hanging garment installation is one of the most automated in Europe.

On the opposite side of the logistics centre are automatic loading docks that can process 1,000 boxes of folded garments and accessories per hour. The boxes are passed through a weighing and labelling area and identified with a tracking ID so they can be located at any time. Like the hung garment area, the folded garment warehouse prepares boxes to be either shipped or stored based on in-store sales information.

"We are a fashion company with digital transformation and data in our hands, and we want to deliver meaningful changes. We can do this if we control our operations," says Mango's general manager Toni Ruiz, who pledged to allocate an additional €35 million to expand the space by 295,000 square metres in the coming few years.

Fast fashion's efficiencies

Fast fashion retailers like Inditex have set the pace for agile supply chains by sourcing production close to its headquarters to make its lead times speedier. Today, its Zara brand takes about 10 to 15 days to bring a new item from concept to shop floor. In comparison, British online retailer Asos, which has many factories in continental Europe, takes four to six weeks - about the same time as Mango.

This shift toward speed has forced companies like Mango to rapidly update their bricks-and-mortar retail models for the digital age. Both Mango's folded and hung garment operations in its new hub feature temporary storage spaces where products are ready to leave the facility in a few days or be kept up to four to five weeks. Items are selected to be shipped to stores according to predictive models and data analysis systems, carried out by the company's integrated Warehouse Management System.

Following Zara's footsteps, Mango does not replenish but instead replaces sold-out styles with new looks. That way, shoppers know to purchase an item when they see it because they might not have the opportunity to again, resulting in fewer markdowns and stronger margins. About 35,000 boxes of garments leave its logistics centre daily in roughly 70 trucks.

Ruiz hopes that Mango's focus on streamlining logistics and automating its warehouse technology will help it better compete worldwide amid significant changes in the industry. The rapid rise of online competitors - from e-commerce upstarts like Boohoo and Nasty Gal to established giants like Amazon - is driving greater online fashion consumption. Companies like Mango have had to respond.

"Mango's store network has gone through a very quick and important transformation," says Antonio Pascual, Mango's supply chain director, noting that the retailer has increased the average surface of its stores by almost 50 per cent, from 500,000 square metres of floor space in 2012 to over 800,000 square metres today. The larger, revamped stores offer shoppers a more complete online-offline experience, including easier returns and click-and-collect.

New logistics

The opening of the Llicà d'Amunt site marks the first global distribution centre for Mango, whose operations were previously run out of smaller warehouses spread across multiple locations. By co-ordinating production and leveraging the latest technologies such as automation and tracking IDs, Mango can continue to get its latest styles onto the sales floor, satiating consumers' need for newness. In the new centralised logistics centre, Mango's clothing - produced in one of its 1,200 factories - is ready to be shipped in less than four hours if necessary.

"It guarantees we can do everything in the same place," says Pascual. "It's not about loading more trucks and garments, but maintaining a good level of service."

After three years of stagnant sales, revenues picked up in 2018: Mango reported revenues of €2.23 billion, an increase of 1.8 per cent from the 2017 financial year. It reached the breakeven point in operating profit, despite a net loss of €35 million for the year. Gross profit increased by 36 per cent year on year, with EBITDA up 17 per cent to €135 million.

Ruiz says this was driven by the success of Mango's new collections and online sales, which grew 31 per cent year on year to €445 million. He declined to forecast sales figures for 2019, but noted that the next six weeks of holiday season would be "super important".

While Mango has its main e-commerce warehouse in Palau-solità i Plegamans, garments from the facility can also be used to fulfil e-commerce orders if necessary. Investments in transforming the store network and logistics system have had a halo effect on online sales. E-commerce accounted for 10 per cent of total company turnover in 2015, and now accounts for 20 per cent of turnover, two years earlier than expected. Executives forecast that the channel will represent 30 per cent of sales by the end of the year.

Facing competition

While the efficiency of Mango's new logistics centre has contributed to a gradual turnaround, Pascual says there's plenty more to be done, and the company is working on more solutions to tackle challenges such as returns, which "force us to constantly adjust our reverse logistics", he says. The company has also designed a flexible network of eight satellite distribution centres, with one opening in Mexico just a few months ago, "to be closer to our customers and offer the best service possible".

Mango's new strategy is poised to make it more up-to-date and dynamic. But keeping up with Zara is no easy feat: the company updates its inventory about twice a week, releases on average 500 new designs every seven days.

Pascual asserts that it isn't Mango's priority to compete with Zara. "Mango offers a great product in terms of value," he says. Pascual stresses that the brand prefers to embrace relevant moods each season, rather than copying styles from the runway. "This is a key difference versus our competitors and a bet for value for our customers and the key to our success over the past 35 years."
To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Vestiaire's ex-CMO brings luxury bag rentals to the UK How to sell fashion on Instagram without traditional influencers H&M's millennial brand bets on livestream shopping

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Mango is building a faster fashion brand

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Mango's automated centre consolidates the company's logistics, giving it more control over customer experience and product allocation. The strategy is to speed up shipping and delivery times to better respond to trends as fast fashion gets more competitive. Since opening the centre, Mango has tripled the number of garments processed per hour and can ship items within days.

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Powerful shots of stimulus from governments and central banks will push up inflation once the immediate Covid-19 crisis fades, according to some high-profile fund managers.

At the moment, most money managers and economists reckon deflation is the more immediate risk. The eruption of mass unemployment, stay-at-home orders and social distancing together constitute one of the biggest shocks to economic demand in history.

Yet some investors argue the real longer-term threat is the return of inflation, as policymakers' dramatic interventions to prop up demand ultimately drive up prices.

"We are witnessing the 'great monetary inflation' - an unprecedented expansion of every form of money unlike anything the developed world has ever seen," Paul Tudor Jones, head of Connecticut-based Tudor Investment Corporation, said in his latest letter to investors. "High debt accommodated by money printing is difficult to banish. Inflation expectations could one day respond to this reality."

Hedge fund manager Crispin Odey also expects inflation to get "pretty red hot". The founder of London-based Odey Asset Management is reluctant to bet on such an outcome, as long as economies are in lockdown and the markets remains focused on the threat of deflation. But he argued inflation is ultimately unavoidable given the level of stimulus.

The disruptive effects of Covid-19 on global supply chains will also help stoke price increases, said David Einhorn, the head of New York-based Greenlight Capital.

"Opportunistic price-gouging on toilet paper, hand sanitiser, milk, rice and potatoes is not a signal of broad inflation. However, a country that consumes much more than it produces, financed by ongoing money creation, will have more money chasing fewer goods and services," Mr Einhorn wrote to investors earlier this month. "Once the initial shock wears off and the recovery begins, the inflation will begin to show up."

This remains a minority view, but it is one that is starting to attract some attention. More than 1,100 listeners tuned in to a Morgan Stanley webcast this week when the bank's analysts presented a case for inflation staging a comeback. That is about double the audience for a typical webcast.

"Just as the consensus underestimated the disinflationary trends of the past 30 years, it is at risk of underappreciating the inflation threat," Chetan Ahya, Morgan Stanley's chief economist, said in a report. "I would argue that the driving forces of inflation are already aligned and a regime shift is under way."

Over the past three decades, inflation has been held in check by technological advances, globalised trade and the rise of multinational companies that have outsourced production and hamstrung workers' ability to extract higher wages. Those factors could reverse in the coming years, said Mr Ahya, and help propel inflation above central banks' targets by 2022.

Market indicators such as subdued government bond yields suggest that few investors think inflation is a real danger. US five-year inflation swaps - a closely watched gauge of investors' expectations of price rises over the longer-term - have rebounded from their March lows but remain around 1.7 per cent, below the Federal Reserve's target of 2 per cent. The equivalent measure in the eurozone is just 0.87 per cent.

Some say central banks' vast bond-buying programmes are distorting the markets' usual signals on the path of prices. But many investors are wary of committing to bets on rising inflation given their experience of the aftermath of the 2008-09 crisis, when years of extraordinary stimulus did not lead to a surge in consumer prices.

Unlike in 2009, few investors are placing "high-conviction bets" against government bonds in anticipation of inflation, said a senior trader at one of the top bond-dealing banks. "The market is clearly not worried about inflation pressures currently, but you worry slightly that investors are still fighting the last crisis," the trader said.

Other analysts are sceptical. Given the indebtedness of many companies, the economic shock from the coronavirus outbreak could instead trigger a self-reinforcing spiral of deflation and defaults, according to Matt King, a Citigroup strategist. "At best, the debt overhang and desire to rebuild buffers will have long-lasting deflationary consequences," he said. "At worst, defaults will feed on each other."

Inflation sceptics also point to Japan, where despite decades of hyperactive monetary policy from the central bank, prices have rarely risen with any consistency.

Mr Tudor Jones argued that the struggling Japanese banking sector and the sluggishness of policymakers' initial response caused deflation to become entrenched. Moreover, growth in Japan's monetary base has never approached the rapid levels seen in the US today, which is expanding at the fastest pace since World War II, according to Tudor's estimates.

The hedge fund manager conceded that inflation will likely slide in coming months. But he is betting that even when the most intense phase of this crisis has passed, governments will struggle to wean themselves off central bank-financed spending - something that economists dub " fiscal dominance ". This, he argued, could revive inflation as the global economy recovers.
Twitter: @robinwigg

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Investors warn Covid-19 crisis is paving the way for inflation

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Powerful shots of stimulus from governments and central banks will push up inflation once the immediate Covid-19 crisis fades, according to some high-profile fund managers. At the moment, most money managers and economists reckon deflation is the more immediate risk.

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Younger consumers are seriously concerned with social and environmental causes, which many regard as being the defining issues of our time. They increasingly back their beliefs with their shopping habits, favoring brands that are aligned with their values and avoiding those that don't.

Brands are responding by integrating social and environmental themes into their products and services. The benefits of these policies are clear, but as the causes that some brands champion venture into controversial territory there are risks and consequences for those that fail to get it right. Against that background, in our latest State of Fashion report-written in partnership with the Business of Fashion (BoF) -we dived deeply into the rise of "woke" consumers as one of ten trends the fashion industry should watch in 2019.

Nine in ten Generation Z consumers believe companies have a responsibility to address environmental and social issues. The inclusion of the latter is a departure from the views of the previous generation of millennials, which had a greener focus. The change is reflected in the higher profile of social issues and in campaigns such as #metoo, #blacklivesmatter, and #timesup, all of which have entered the mainstream lexicon over the past couple of years.

The views of Gen Z and millennial consumers are critical. Together, these cohorts represent around $350 billion of spending power in the United States alone (approximately $150 billion spent by Gen Z and around $200 billion by millennials); additionally, Gen Z will account for 40 percent of global consumers by 2020. But concern over environmental and social issues is not restricted to younger consumers. Some two-thirds of consumers worldwide say they would switch, avoid, or boycott brands based on their stance on controversial issues. Half of these regard themselves as activists, driven by passion. The other half are less dogmatic, tailoring their decision to the situation at hand.

Still, the dynamics behind the numbers are compelling. Over the past three years a third of consumers worldwide have expanded the scope of their purchasing decisions to incorporate principled values and views. A new global ethos is emerging, and billions of people are using consumption as a means to express their deeply held beliefs.

Signs of this evolving agenda can be found beyond consumer sentiment, too. Fashion companies are showing signs of getting "woke" (a phrase defined as "alert to injustice in society," popularized on social media). For example, based on a "data scrape" of more than 2,000 fashion retailers, the appearance of the word "feminist" on homepages and newsletters increased by a factor of more than five from 2016 to 2018.

Many brands and retailers, including Levi Strauss and Nike, are on board, and both companies have taken a clear stance on social issues in recent months-Nike supporting Colin Kaepernick, the face of the NFL's "anthem protests," and Levi's fronting a campaign against gun violence. Gucci has also supported that cause, supporting a student-led march calling for more gun control.

And American designer Jeremy Scott appeared at his New York Fashion Week show with a T-shirt urging, "Tell your senator no on Kavanaugh," in reference to the then-embattled US Supreme Court justice undergoing confirmation hearings.

In Asia, Fast Retailing, the parent company of Japanese retailer Uniqlo, has made efforts to hire refugees and, since 2016, has donated more than $5 million to the support of refugee initiatives in Asia. British retailer ASOS has taken a different approach to support refugees, launching an exclusive lingerie line in partnership with designer Katharine Hamnett and Help Refugees, a nongovernmental organization that will receive all profits from the initiative.

Some fashion players have attached collections and ranges to specific causes-for example, H&M launched a Pride collection in 2018 in support of the LGBTQ+ community, and Balenciaga collaborated with World Food Programme, donning its slogan, "Saving Lives, Changing Lives." And others have geared campaigns to reflect beliefs; in a 2018 campaign to promote diversity, for example, Moschino switched to using only models of color.

Some companies are taking things a step further, putting purpose at the heart of their strategy and operations. There are growing numbers of B-Corporations, which are certified to have considered the impact of their decisions on people, society, and the planet (exhibit). Companies including Ben & Jerry's, Danone, and Patagonia are B-certified. In the fashion, apparel, and beauty sector, the number of B-corps had risen to nearly 200 as of April 2018, compared with just seven in 2010. Athleta promises that 40 percent of its products are made of recycled and sustainable materials, while Allbirds and Eileen Fisher have made similar commitments. The former donates returned used shoes to charity. We would not be surprised if at least one $500 million-plus fashion company became a B-corp in 2019.

Notably, environmentally and socially focused companies are considered by younger cohorts to be better prospects as employers, and the vast majority say they would be more loyal to companies that are aligned with those values. Commitment to tracking organizational key performance indicators is critical, as LVMH has done, setting out to have equal gender representation among executive ranks by 2020. A commitment to values on a group level can have impact on its brands' culture. As mentioned by Balenciaga chief executive, Cédric Charbit, "I think the fact the brand belongs to Kering, and having Kering expressing commitment towards sustainability and values as a group, makes a difference. You work in an environment where this matters, this exists, and we all are committed to this."

Not all causes that fashion brands advocate are universally popular, and these can come with significant risks. The NFL "anthem protest" was a divisive issue in the United States, creating a mixture of applause and backlash for Nike. Still, it created earned media exposure worth more than $163 million, within just days of the campaign launch. Besides potential controversy from supporting divisive causes, brands may also risk being perceived as hypocritical if they do not carefully ensure consistency in their messages and actions. In 2018, Primark was severely criticized and called unethical for releasing a line of Pride-themed T-shirts that were produced in Turkey, a country that is ranked the third worst in Europe for LGBTQ+ equality. Nike recently faced pressure from civil-society groups to ensure fair wages are paid to workers of suppliers in emerging markets.

Another reason that brand alignment with causes can backfire is that discerning consumers can easily spot the difference between gimmicks and a genuine purpose that aligns with the values of the organization. Companies can expect consumers to closely examine the level of continuity across campaigns and the nature of their strategic and operational decisions, as well as their tone.

It is worth noting that right now the movement is much more pronounced in Western markets, and in certain territories it is not at all appropriate for brands to align with certain issues. While consumers in Western markets currently do tend to dominate the movement toward environmental and social conscience, that is likely to change. In the coming year we expect rising numbers of consumers in other markets to increase their levels of commitment. Darshan Mehta, founder and chief executive of Reliance Brands, a subsidiary of the Indian retail conglomerate Reliance Industries, believes "the number of voices is not enough to aggregate to anything significant [yet], but it's a small wave and a tsunami may wash onto our shores [in India] in the years to come."

Despite the many associated risks, some large brands will be willing to court controversy to express beliefs, particularly luxury players, which will seek to attract younger consumer groups looking to trade up. There are clear benefits from doing so, and the more that companies express an authentic view, the more that those who don't will be exposed. And while there is a counterargument that expression of controversial views may deter some customers, the calculation, of course, is that the loyalty rewarded by its remaining customers matters more.

For more on all ten trends that will define the fashion agenda in 2019, see The State of Fashion 2019: A year of awakening.

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The influence of 'woke' consumers on fashion

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Gen Z fashion trends are rooted in social and environmental issues. Here's what the industry should know.

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LONDON, United Kingdom - After enduring weeks of mandated quarantine, Chinese shoppers are slowly repatriating luxury malls. Some of the country's manufacturers, hit hard by nation-wide lockdowns, are seeing workers return to their posts as infections drop in the first country struck by Covid-19.

The news should be a relief for the global businesses, which have seen plummeting sales and disrupted supply chains in the world's second biggest economy hit their bottom lines. But in China, businesses' woes are far from over.

The pandemic - which has infected over 203,614 people and killed 8,226 as of March 18 - has already made a staggering impact on global companies' financials. Investment banking firm Cowen predicts that Nike's revenue could fall by a third in their fourth quarter, while H&M Group, which shuttered 334 out of 518 mainland stores during the virus' peak - reported a 24 percent drop in Chinese sales during the first quarter.

China may have entered recovery mode, but countries like the US, France, Italy and the UK are only just beginning to feel the heat from government lockdowns and sluggish spending. With more reported cases of coronavirus outside mainland China than within the country, experts now expect an economic fallout of a similar magnitude to reverberate through western markets as the virus spreads.

For brands like H&M, which has temporarily shuttered stores in Italy, France and Spain, a decline in sales from China could be the first of many across global markets.

"The US and Europe are about a month or so behind China epidemiologically speaking, but also economically," economist George Magnus wrote for Barron's. This makes sense given that policies adopted by governments in the US and Italy are now mirroring Beijing's from January.
Looking for Clues in China
Though most of 's stores in China have now reopened, owner Inditex, which released full year results on March 18, wrote down almost €300 million ($335 million) of its Spring/Summer inventory with coronavirus in mind. The group has already recorded a 24 percent drop in sales over the past two weeks due to store closures across Europe.

Prada announced its full year results on the same day and warned of a negative impact on performance for the year ahead due to the pandemic.

Official data from China for the first two months of 2020, released this week, paints a stark picture of what other markets are up against. Industrial activity was expected to drop by 3 percent but instead declined by 13.5 percent during the period. Retail sales - forecast by Bloomberg to contract 4 percent - fell by 20.5 percent. Experts warned that March data won't improve by much and that months of turmoil will result in a significant contraction in the country's first quarter GDP.

Chinese firms still have inventory but we will see what happens after two months.

According to analysis by research consultancy Capital Economics, data suggests that China's gross domestic product contracted 13 percent during the first two months of the year. Beijing has maintained an optimistic front. China's National Bureau of Statistics expects the economy to pick up during the second quarter as people return to work and emergency measures like interest rate cuts kick into effect.

But "business as usual" will be no simple feat, even for a consumption and manufacturing powerhouse. While unemployment (up at a record 5.7 percent in February) is set to worsen consumer appetite, international lockdowns will reverberate back on the country's supply chains and investment routes.

This will be felt particularly by automotive, electronics and apparel sectors due to their long and often convoluted supply chains, said Sun Xin, lecturer in Chinese and East Asian business at King's College London.

"The effect [on manufacturing] is not felt right now as shutdowns in America and Europe just happened...Chinese firms still have inventory but we will see what happens after two months," added Sun. "[Social distancing] has a huge negative impact on retail consumption, so from this perspective what happens in China is going to happen in all these other countries."
Impact Shifts from Supply to Demand
However, Sun noted a key difference in how Covid-19 could play out in the west: Chinese bureaucracy and surveillance capacities allowed Beijing to implement self-isolation policies in a much more effective manner to keep the virus' spread under relative control. "We now expect the pandemic to last much longer in Europe and the US compared to China," he said. "Social distancing in China is way more effective than anywhere in the world."

Sun also notes that there is some doubt as to the veracity of official data in the mainland, which could overplay the rate at which the country is recovering from the crisis.

Even so, businesses can expect obstacles arising in markets like the US to take a similar form to what they and local players are dealing with in the mainland. Magnus warned that in the west, virus mitigation measures will result in income loss for workers employed in hard-hit consumer sectors. Supply could lag behind as employees, like China's manufacturing workers, are prevented (due to lockdowns and a lack of financial support) from getting to work.

Chinese firms are prepared for a long-term economic decline rather than a short-term shock.

As factories get up and running in China, there's still the lack of demand to consider.

"Everywhere in the world, people are reducing consumption and investment. The demand for products will decline by a huge margin," said Sun. While the Trump administration is proposing a $850-billion stimulus package to cushion the blow for American businesses, "it might not be enough," Magnus added.

Ultimately, the pandemic's indiscriminate nature means that recovery will be a global effort as experts seek to pinpoint "when" a recession will hit, rather than "if" it will happen at all.

"This is not going to end very quickly," said Sun. "Chinese firms are prepared for a long-term economic decline rather than a short-term shock. They are still suffering from the lack of global demand."
We're tracking the latest on the coronavirus outbreak and its impact on the global fashion business. Visit our live blog for everything you need to know. Related Articles: Coronavirus Is Already Changing How People Shop. Here's How. How to Talk to Customers During the Coronavirus Pandemic Fashion on Lockdown: What's Closed, What's Cancelled

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What China's Economic Disruption Spells for the Global Fashion Industry

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LONDON, United Kingdom - After enduring weeks of mandated quarantine, Chinese shoppers are slowly repatriating luxury malls. Some of the country's manufacturers, hit hard by nation-wide lockdowns, are seeing workers return to their posts as infections drop in the first country struck by Covid-19.

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However, as well as finally launching its company voluntary arrangement (CVA) proposals - seven across various Arcadia brands, which are due to be put to a vote on Wednesday - Green has conjured up a £135m rescue plan for the once-mighty retail empire.

The plan involves investing £75m in refurbishing stores and £60m into enhancing the group's online offer over the next three years. Alongside this, Topshop/Topman is to be sold on Asos for the first time.

The strategy attracted praise from both the consumer press and fashion industry insiders, and will come as welcome news to customers used to Asos's slick delivery and returns.

"I think it's symbolic - Topshop could and should have gone on Asos years ago," says retail analyst Richard Hyman. "Arcadia needs all the incremental business it can possibly get, and going on Asos will generate that."

Chloe Collins, senior retail analyst at research firm GlobalData, adds that selling on Asos will help to increase Topshop/Topman's international reach. This is key, as Arcadia has announced it will close all 11 of the brands' stores in the US in the face of "unprecedented" market conditions.

International sales have grown consistently at Asos, and were up 12% to £799.8m in the six months to 28 February.

"With Asos gaining market share over the past few years as online retail has come into focus, the decision to start selling Topshop/Topman through the platform will allow the brands to extend their customer reach," Collins points out.

However, she adds that improving its own online offer is essential: "Arcadia is wise to be investing £60m into its own websites to boost more profitable sales, as Asos will always take a share of the revenue driven.

"Topshop/Topman should invest in a delivery-saver scheme to compete with Asos Premier, and also offer more competitive prices for normal deliveries. Its standard delivery price is £4 and is free over £50, in comparison with Asos at £3 and free over £25."

One supplier to Arcadia agreed that wholesale was the way forward for the group: "I think the only way [Arcadia] is going to survive is through wholesale. They sell some brands on Asos and Zalando and they do really well. They can sell some really large quantities of clothes through these platforms."

The tie-up makes sense for Asos, too. Although its group revenues were up 14% to £1.3bn for the six months 28 February, its pre-tax profit fell 29.9% to £4m following heavy investment in its technology platforms and logistics. It follows a shock profit warning from the etailer towards the end of 2018.

Asos has been reviewing its brands as part of its strategy to boost sales. During the six months to February, it axed more than 280 brands and added 190 new names. It is focusing on securing smaller, up-and-coming brands to sit alongside more established names such as & Other Stories, which launched on the site for the spring season.

Property experts also welcomed the £75m earmarked for improving Arcadia's stores.

One property agent says it is playing catch-up after years of under-investment: "Every time we get a Dorothy Perkins or Evans back when a lease expires, it shows substantial dilapidation. [Green] hasn't spent money on his stores for years."

However, some observers argue that the problems at some of Arcadia's fascias run deeper than tired shopfits - they agree that Topshop/Topman is the jewel in Arcadia's crown, but Burton, Dorothy Perkins, Evans, Outfit and Outfit Kids, and Wallis have lost relevance in the market.

"The problem with Evans is that it focuses on plus sizes, but other retailers and brands have extended their ranges [to include bigger sizes]," notes Collins. "Its unique selling point has disappeared."

One Arcadia supplier says Wallis has been hit by the problems at Debenhams: "Its biggest outlet is Debenhams and the struggles there have hurt Wallis. The woman who used to only go into Marks & Spencer and Wallis is not there any more. Everyone goes everywhere now - they shop around, people don't care."

Another Arcadia supplier tells Drapers the group has failed to keep up with rivals such as Primark: "Primark and the supermarkets have killed Arcadia on price and fashionability, so I can't see how they can recover their business at this stage.

"[Arcadia brands] aren't necessarily more expensive than before, but there are more and better options out there now. If [Green] drops his margins overnight, will it increase sales? It's difficult to get to Primark's level - it's easier to start from the bottom [of the market], rather than come down from above by reducing prices."

Apart from stores, investment in staff and training is also an issue Arcadia needs to address, according to one former Evans buyer: "When I started at Evans, they had the best systems and best training out there, but Green got complacent and stopped investing. The world overtook him.

"He has incredibly loyal staff, and they have been there a long time, but the flipside is they only know one way of doing things. There is resistance to change in the group."

Whatever happens at the vote on Arcadia's CVA proposals, radical change is needed if the group is to survive. Arcadia declined to comment.

The Drapers Verdict

Green has finally placed his bet on rescuing Arcadia, but the big question is whether £135m is too little, too late. The group is a mish-mash of brands, most of which have lost their relevance in the market.

It needs major surgery on its stores and it is out-priced by rivals. To turn it around, Green needs to wake up to the changing landscape of retail. He has grudgingly begun to do so - the partnership with Asos is a no brainer - but will much-needed changes to its own websites and stores happen fast enough? Arcadia's rescue plan could be Green's last roll of the retail dice.

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However, as well as finally launching its company voluntary arrangement (CVA) proposals - seven across various Arcadia brands, which are due to be put to a vote on Wednesday - Green has conjured up a £135m rescue plan for the once-mighty retail empire.

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Comprising Topshop, Topman, Miss Selfridge, Dorothy Perkins, Burton, Evans, Wallis and Outfit, its broad market reach across a wide demographic held great appeal to consumers across the UK.

However, as details of the proposed restructuring emerge this week, Arcadia 's fortunes have reached a new nadir.

The root cause of its problems is a failure to keep up with the market and therefore, its customer.

Once at the forefront of innovation, the business missed a digital trick when it failed to embrace multichannel shopping and invest where its customer had already migrated to.

The cost of this delay was multiplied when new entrants such as Asos, Boohoo and PrettyLittleThing stormed into the market with a fast fashion offer and a strong customer engagement strategy.

Embracing new channels such as social media, these players found a new way to talk to the younger customer and become part of their online communities.

Offline, Arcadia has also faced challenges. While the Topshop flagship on Oxford Street is a shining example of store innovation, many shops across the group portfolio look outdated and unloved.

Arcadia's store estate remains too large and, like many other high street players, it has not scaled back at the pace of the market. As it attempts to restructure, its proposed company voluntary arrangement (CVA) suggests only 23 store closures and rent reductions and revised leases on 194. It has been met with criticism from the Pensions Regulator for not going far enough.

Product-wise, once one of the coolest and most relevant young fashion brands on the market, Topshop has lost its leading position. Gone are the days of Kate Moss mania, Beyoncé launching a sportswear collection with the retailer and its prominent position at the heart of London Fashion Week.

Despite all of this, there are still some glimmers of hope. When Topshop gets product right, it flies. Just this season, customers were crying out for another drop of the sold-out Topshop satin midi-skirt.

The Topshop flagship is still a magnet for customers and showcases the best of what the brand has to offer, driving customers in store through experiential initiatives.

Meanwhile, the sheer scale of the Arcadia operation gives it clout with suppliers who will want to support its reinvigoration.

The proposal to sell or close the international business will allow it to focus on its UK operation.

The business faces many challenges but there is much talent still at Arcadia. Let's hope the restructuring is the first step to getting it back to its position as a leading high street player.

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Editor's Comment: Hard lessons for the once-mighty Arcadia

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Comprising Topshop, Topman, Miss Selfridge, Dorothy Perkins, Burton, Evans, Wallis and Outfit, its broad market reach across a wide demographic held great appeal to consumers across the UK. However, as details of the proposed restructuring emerge this week, Arcadia 's fortunes have reached a new nadir.

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Arcadia Group, the parent company of brands including Topshop, Wallis, Burton and Dorothy Perkins, is to postpone payments based on the current outlook for the Covid-19 situation.

It is understood that Lady Green will continue to make her contributions, as agreed with The Pensions Regulator, on time.

Following Arcadia's company voluntary arrangement, the company is due to pay £25m annually into its pension scheme for three years. This would equate to monthly payments of just over £2m.

Lady Green is to provide an additional £100m of cash into the schemes to help bridge the shortfall, with funding of £25m per year for the coming three years, plus an additional £25m contribution.

This means that with the now deferred payments, the pension contributions have been halved. It is understood that The Pensions Regulator has agreed to this.

Drapers revealed this weekend that Arcadia Group has written to suppliers to inform them that it will be cancelling all orders and extending payment terms, in a bid to protect the business during the coronavirus outbreak.

The letters, sent to suppliers on 27 March and seen by Drapers, state that all orders will be cancelled until further notice, and payment terms will be extended by 30 days, with immediate effect. The standard terms will therefore be 90 days.

Arcadia has declined to comment. The Pensions Regulator has declined to comment.

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Coronavirus: Arcadia to defer pension payments

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Arcadia Group, the parent company of brands including Topshop, Wallis, Burton and Dorothy Perkins, is to postpone payments based on the current outlook for the Covid-19 situation. It is understood that Lady Green will continue to make her contributions, as agreed with The Pensions Regulator, on time.

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The letters, sent to suppliers on 27 March and seen by Drapers, state that all orders will be cancelled until further notice, and payment terms will be extended by 30 days, with immediate effect. The standard terms will therefore be 90 days.

"Global retailing is facing unprecedented times with the impacts of Covid-19 unfolding and changing daily", the letters read. "As many of you will be aware, following UK government intervention, we were forced to close our stores last week to safeguard the welfare of our employees, customers and communities.

"You will appreciate that this has significantly hindered our ability to make use of any goods supplied by you and has dramatically reduced the revenue coming into our business. As a result, we need to take action wherever possible with each of our stakeholders to preserve the future of the Arcadia business for the benefit of our employees, suppliers and customers."

"We have worked with our loyal supplier base for many years and value our relationships enormously", the letters add. "This is not a decision we have taken lightly and we do not underestimate the impact this will have for you and your business. We thank you for your understanding and cooperation at this very difficult time."

Since the coronavirus outbreak, retailers including Primark, Edinburgh Woollen Mill Group (EWM) and New Look have also written to suppliers to cancel orders until further notice.

Arcadia Group declined to comment.

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Arcadia cancels orders and extends supplier payments

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The letters, sent to suppliers on 27 March and seen by Drapers, state that all orders will be cancelled until further notice, and payment terms will be extended by 30 days, with immediate effect. The standard terms will therefore be 90 days.

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Over the past 10 years, as I have gone from owning multiple retail fashion stores to a more tech-based fashion business, I have seen significant changes in the ways that clothes are being manufactured, shipped, sold and used. In fact, the way I do business has fundamentally changed in response to the new landscape of "fast fashion." Fast fashion is a result of mass-market retailers increasing the production of inexpensive fashion lines to meet the demands of quickly changing trends.

In the past, production followed the four main fashion seasons: spring, summer, fall and winter. These traditional seasons have all but disappeared in the face of faster production driven by emerging trends. According to Investopedia , it is not uncommon for retailers to introduce new products multiple times in a single week to stay on trend.

This type of mass production may seem like a good thing at first glance, but I believe it is causing more problems than it is solving. It is crucial that existing companies and startups become aware of the negative impacts that fast-fashion overproduction is causing because it can and will impact your fashion business.

Here are three fast-fashion downsides of which you need to be aware, as well as some insight into how to make sure you are not part of the growing problem.
1. Low Wages And Terrible Conditions For Workers
According to research by Global Labor Justice, female garment workers in and supplier factories in Asia have faced exploitation and mistreatment that includes abuse, poor work conditions, low wages and forced overtime.

I have made not only a strategic decision but a moral one to pledge that my company will not support terrible work conditions. We are not creating new fashion and adding to the waste, but instead are using existing styles. If you are working with a manufacturer of new clothes, ensure that you are not supporting work conditions that are harming front-line workers.

Don't be afraid to ask your vendors and supplies important questions about where products are made and what the turnaround time is for orders. Ask for details such as how many people work there and if there are multiple companies working out of the same location. Do your due diligence when deciding which vendors and manufacturers to work with. Watch for warning signs and use your best judgment and intuition if something doesn't feel right.
2. Polyester Pollution
Highlighted in an article in , one of the reasons to radically rethink the way we manufacture has to do with the impact on our rivers, lakes and oceans. According to the article, microfibers from synthetic fabrics are released into our waterways - and, from there, into our rivers, lakes and oceans - every time they are washed in domestic washing machines. The small size of the microfibers means they are easily consumed by fish and other wildlife.

If you want to support sustainable fashion, it could be as simple as buying from designers and manufacturers that are known for their environmental awareness and preference for using sustainable fabrics. There is a new movement in the fashion industry toward creating products from sustainable materials, such as hemp soil, organic cotton, organic linen and bamboo - these are known as vegan fabrics.

When brands highlight what they are doing to support sustainable fashion, it shows customers that they are not adding to the waste. It could be as simple as being transparent about where your products come from and what materials you use.
3. More Clothing Produced Equals More Waste
The reality is that people don't keep their clothes as long as they used to, and the rate of production to keep up has resulted in (literal) tons of excess inventory and waste. When I was making a site visit to a warehouse in the fashion district of Los Angeles, I will never forget seeing the massive bundles that were stacked high and covered almost the entire facility. When I asked about them, someone said, in a matter-of-fact tone, "That's our excess inventory."

I knew that it was important for my company to not add to this proverbial pile, but instead to help make sure that more clothing items see their way to customers. My business model revolves around supporting sustainable fashion by leveraging excess inventory so customers know that our outfits are not adding to the waste.

Consider holding a giant excess inventory sale or rewarding customers for bringing in second-hand clothes. For example, H&M launched a program to accept and recycle its branded clothes at return stands. But inventory sales aren't the answer alone. The solution is a long-term one that requires a cultural shift. There are many in the industry that don't want to see change happen. But with enough of us who are willing to support sustainable fashion, we can work toward a better future.

If you want to get started today, action steps include doing your research on current and future manufacturers, being more aware of the environmental impacts of the products you sell, and being proud to share with your customers that you care about sustainable fashion.

What are some ways that your company is trying to combat the negative impacts of fast fashion?

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Council Post: Three Reasons Why Fast Fashion Is Becoming A Problem (And What To Do About It)

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Over the past 10 years, as I have gone from owning multiple retail fashion stores to a more tech-based fashion business, I have seen significant changes in the ways that clothes are being manufactured, shipped, sold and used. In fact, the way I do business has fundamentally changed in response to the new landscape of "fast fashion."

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Mango's automated centre consolidates the company's logistics, giving it more control over customer experience and product allocation.

The strategy is to speed up shipping and delivery times to better respond to trends as fast fashion gets more competitive.

Since opening the centre, Mango has tripled the number of garments processed per hour and can ship items within days.

LLICA D'AMUNT, Spain - Every item of clothing sent to Mango's 2,100 stores in 110 countries around the world first passes through the Spanish fashion label's new logistics centre in Llicà d'Amunt, a picturesque town outside Barcelona. Approximately 600 people work six days a week at the highly automated facility, where around 400 operations are machine-driven, to process items for store deliveries.

The company has so far invested €232 million in the 186,000-square-metre facility, which can stock up to 7 million hung garments and 20 million folded garments and accessories at the same time. It was completed in 2016 but became fully operational last summer. By incorporating the latest automation technologies, the centre is able to process 75,000 garments an hour, tripling the retailer's former capacity.

As soon as hung garments arrive at Llicà d'Amunt, they are unloaded onto one of nine automatic loading bays, which can process 27,000 garments an hour. Each bay is equipped with a classifier that separates the garments by size and style. They then travel along a 24-kilometre rail to be shipped out to stores or held in the warehouse. According to Mango, its hanging garment installation is one of the most automated in Europe.

On the opposite side of the logistics centre are automatic loading docks that can process 1,000 boxes of folded garments and accessories per hour. The boxes are passed through a weighing and labelling area and identified with a tracking ID so they can be located at any time. Like the hung garment area, the folded garment warehouse prepares boxes to be either shipped or stored based on in-store sales information.

"We are a fashion company with digital transformation and data in our hands, and we want to deliver meaningful changes. We can do this if we control our operations," says Mango's general manager Toni Ruiz, who pledged to allocate an additional €35 million to expand the space by 295,000 square metres in the coming few years.

Fast fashion's efficiencies

Fast fashion retailers like Inditex have set the pace for agile supply chains by sourcing production close to its headquarters to make its lead times speedier. Today, its Zara brand takes about 10 to 15 days to bring a new item from concept to shop floor. In comparison, British online retailer Asos, which has many factories in continental Europe, takes four to six weeks - about the same time as Mango.

This shift toward speed has forced companies like Mango to rapidly update their bricks-and-mortar retail models for the digital age. Both Mango's folded and hung garment operations in its new hub feature temporary storage spaces where products are ready to leave the facility in a few days or be kept up to four to five weeks. Items are selected to be shipped to stores according to predictive models and data analysis systems, carried out by the company's integrated Warehouse Management System.

Following Zara's footsteps, Mango does not replenish but instead replaces sold-out styles with new looks. That way, shoppers know to purchase an item when they see it because they might not have the opportunity to again, resulting in fewer markdowns and stronger margins. About 35,000 boxes of garments leave its logistics centre daily in roughly 70 trucks.

Ruiz hopes that Mango's focus on streamlining logistics and automating its warehouse technology will help it better compete worldwide amid significant changes in the industry. The rapid rise of online competitors - from e-commerce upstarts like Boohoo and Nasty Gal to established giants like Amazon - is driving greater online fashion consumption. Companies like Mango have had to respond.

"Mango's store network has gone through a very quick and important transformation," says Antonio Pascual, Mango's supply chain director, noting that the retailer has increased the average surface of its stores by almost 50 per cent, from 500,000 square metres of floor space in 2012 to over 800,000 square metres today. The larger, revamped stores offer shoppers a more complete online-offline experience, including easier returns and click-and-collect.

New logistics

The opening of the Llicà d'Amunt site marks the first global distribution centre for Mango, whose operations were previously run out of smaller warehouses spread across multiple locations. By co-ordinating production and leveraging the latest technologies such as automation and tracking IDs, Mango can continue to get its latest styles onto the sales floor, satiating consumers' need for newness. In the new centralised logistics centre, Mango's clothing - produced in one of its 1,200 factories - is ready to be shipped in less than four hours if necessary.

"It guarantees we can do everything in the same place," says Pascual. "It's not about loading more trucks and garments, but maintaining a good level of service."

After three years of stagnant sales, revenues picked up in 2018: Mango reported revenues of €2.23 billion, an increase of 1.8 per cent from the 2017 financial year. It reached the breakeven point in operating profit, despite a net loss of €35 million for the year. Gross profit increased by 36 per cent year on year, with EBITDA up 17 per cent to €135 million.

Ruiz says this was driven by the success of Mango's new collections and online sales, which grew 31 per cent year on year to €445 million. He declined to forecast sales figures for 2019, but noted that the next six weeks of holiday season would be "super important".

While Mango has its main e-commerce warehouse in Palau-solità i Plegamans, garments from the facility can also be used to fulfil e-commerce orders if necessary. Investments in transforming the store network and logistics system have had a halo effect on online sales. E-commerce accounted for 10 per cent of total company turnover in 2015, and now accounts for 20 per cent of turnover, two years earlier than expected. Executives forecast that the channel will represent 30 per cent of sales by the end of the year.

Facing competition

While the efficiency of Mango's new logistics centre has contributed to a gradual turnaround, Pascual says there's plenty more to be done, and the company is working on more solutions to tackle challenges such as returns, which "force us to constantly adjust our reverse logistics", he says. The company has also designed a flexible network of eight satellite distribution centres, with one opening in Mexico just a few months ago, "to be closer to our customers and offer the best service possible".

Mango's new strategy is poised to make it more up-to-date and dynamic. But keeping up with Zara is no easy feat: the company updates its inventory about twice a week, releases on average 500 new designs every seven days.

Pascual asserts that it isn't Mango's priority to compete with Zara. "Mango offers a great product in terms of value," he says. Pascual stresses that the brand prefers to embrace relevant moods each season, rather than copying styles from the runway. "This is a key difference versus our competitors and a bet for value for our customers and the key to our success over the past 35 years."
To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Vestiaire's ex-CMO brings luxury bag rentals to the UK How to sell fashion on Instagram without traditional influencers H&M's millennial brand bets on livestream shopping

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Mango is building a faster fashion brand

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Mango's automated centre consolidates the company's logistics, giving it more control over customer experience and product allocation. The strategy is to speed up shipping and delivery times to better respond to trends as fast fashion gets more competitive. Since opening the centre, Mango has tripled the number of garments processed per hour and can ship items within days.

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As retail companies deal with excess inventory during Covid-19, the long-term result could be a more nimble fashion industry.

The industry is in liquidation mode, running promotions to clear inventory.

Flexibility will take priority over efficiency, as quantity is no longer the main priority.

Coronavirus is forcing apparel and retail companies to toss normal operational guidelines aside and figure out new ways to function, guided by gut feel and educated guesswork. The near term focus is on clearing inventory and shoring up businesses to survive the coming months. The long-term result may be a more nimble, flexible fashion industry as producers rethink their production and retail approaches.

James Miller, chief executive and chief creative officer of The Collected Group, says he was baffled in late March when he noticed that department stores had not yet cancelled orders placed before the coronavirus lockdowns. He quickly shuttered The Collected Group's own retail stores and ordered his teams to focus on shipping its Equipment, Joie and Current/Elliott brand fashions to wholesale accounts.

"[The plan] was get it out the door as early as we can because then we can invoice it," Miller says. He says he got about a week of shipments out before the industry's supply chains clogged up, as stores cancelled orders across the industry, leaving finished fashions stuck in warehouses, factories and distribution centres around the globe. Then he began discounting existing inventory and cutting the next seasons' production plans.

With stores shuttered and consumers sheltering at home, the fashion industry has shifted into liquidation mode, discounting spring collections that were just shipping into stores when coronavirus hit. The Collected Group's brands are offering 40 per cent off promotions. So is Nordstrom. Even some who once took care to avoid the appearance of discounting have turned promotional: Moda Operandi is pushing 30 per cent off bags, shoes and contemporary designers.

Parts of the industry remain unable to ship products all together. Net-a-Porter's US distribution centre is closed due to the pandemic, preventing it from shipping orders. Ditto for The Row, which promises customers they can place orders for expected shipment in May. And small brands that lack established names and sturdy balance sheets may struggle to survive all together. Relief programmes have been formed by LVMH and the CFDA/Vogue Fashion Fund.

The industry is in the survival stage of the coronavirus shutdown, and many fashion companies are planning for a more nimble future that involves cutting production and preserving profit margins. The last time the fashion industry fell off an economic cliff, in 2008, the ensuing discounting led to a domino effect season after season. Ever-earlier sales trained consumers to expect deep holiday discounts, for instance, before Thanksgiving rather than in January, when they had previously hit. Consumers learned to feel foolish if they paid full price for an item.

This time, manufacturers appear to be more willing to cut back collections and consider factory innovations that allow them to more easily meet consumers' demands. That is likely to reduce revenues this year and into the next - a fact that is largely unavoidable for most brands - but could better preserve profit margins and reduce the unsustainable overflow of fashion goods that no one wants or needs.

Blueprints for new production models

Once Miller clears out The Collected Group's current inventory, he says the company is shifting to a new production model. Collected's resort collections have been cancelled, full stop. Deliveries of the autumn collection and core replenishable designs will arrive in stores when they are appropriate to wear in terms of weather.

Equipment, which before coronavirus had been branching beyond its core shirting and cashmere jumper lines to reach into fashion looks, is retreating back to core. Miller hopes to nearly double the share of those base styles to 50 per cent of revenue from 25 to 30 per cent. Last month, analysts told Vogue Business that brands able to lean on cross-seasonal pieces will be most protected by sales downturns as customers shun trends.

Gelmart International Industries, a manufacturer of lingerie and loungewear brands including French Connection, Lively and Samantha that sell at retailers including Target and Hudson's Bay, is looking more closely at its most flexible production model: two factories in the Philippines that make its Lively brand goods. Those factories, owned by Gelmart, were set up to trade efficiency for flexibility in order to respond nimbly to shifts in demand. Factory technicians learn to move from making one design to another rather than churning out the same pattern repeatedly, says Yossi Nasser, Gelmart's chief executive.

"We didn't want efficiency to be so high. We wanted the factory to be extremely capable of switching SKUs," says Nasser, who says that Gelmart's sales range between $150 million and $250 million annually. The Lively factories run at 60 to 65 per cent efficiency measures, compared with 85 per cent at the large factories elsewhere in Asia that produce Gelmart's other apparel. The more nimble production process is particularly attractive now that the company's executives are working up scenarios for going forward in a coronavirus economy and gauging were there is likely to be pent-up demand, or demand from certain types of customers, like the Gen Z consumers who continue to shop more than their elders, Nasser says, judging by sales in its juniors department.

Time to reset

There are even those who see the disarray caused by coronavirus as creating an opportunity that might have otherwise taken years.

At roughly the same time Miller was maximising his company's shipments to department stores, Lawrence Lenihan and his team were minimising shipments to wholesalers by offering to cut production immediately. Lenihan is the co-founder and chairman of Resonance Companies, backer and producer of brands including Tucker by Gaby Basora, Little Minkoff by Rebecca Minkoff and JCRT. "In mid-March we called Tucker retailers and said we assume you will want to cancel your order. That's fine," says Lenihan. Resonance's just-in-time production model allowed the brand to halt operations without being saddled with markdown inventory.

"If you asked me to trade having no inventory with having inventory that I won't be able to sell pretty soon, I'll take the former," Lenihan says.

Lenihan is moving aggressively to expand Resonance Companies' production from its single factory in the Dominican Republic by breaking ground on another large manufacturing facility and two smaller sewing factories (he calls them "nodes") in the US by the end of July.

An entrepreneur and former venture capitalist who was a seed backer in Shopify and Pinterest and a primary backer of the Tommy John men's apparel label, the self-funded Lenihan says he expects the pandemic to draw as many as 20 more brands to Resonance's production platform by year end. Resonance prints, cuts and sews garments and ships them out the door within six days of orders being placed, using a cloud-based platform and a proprietary factory design.

"It's a trillion dollar industry and it's completely broken. Thirty per cent of all products made in this industry are never sold," Lenihan says. "Our time is now."
Correction: A previous version of this article referred to Resonance Companies as Resonance Industries; it has been updated. It has also been updated to reflect that Lawrence Lenihan is the co-founder, not founder. (30/4/20)
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Tory Burch is fighting for US fashion's aid Customers are spending on comfort as Covid-19 pandemic presses on How a made-in-America brand is dealing with the Covid-19 pandemic

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Fashion production's more flexible future

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As retail companies deal with excess inventory during Covid-19, the long-term result could be a more nimble fashion industry. The industry is in liquidation mode, running promotions to clear inventory. Flexibility will take priority over efficiency, as quantity is no longer the main priority.

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When two different coalitions of industry players announced their proposals to overhaul the fashion calendar last week, both groups addressed the industry's discounting problem. The coalitions called for less frequent and extreme markdowns; since the aftermath of the economic crisis of 2008, discounting periods have crept up from end to mid-season, making markdowns the norm rather than the exception and nibbling at brands' margins and perceived value.

Despite the dangers of markdowns, many retailers, in direct competition and working with razor-thin margins, are currently promoting sales. At the time of publishing, luxury retailers like Moda Operandi, Ssense, Farfetch, Saks Fifth Avenue and mid-market department stores Nordstrom and Macy's were offering discounts of up to 60 per cent.

Discounts can work in the short term, luring those customers who have discretionary income left and are keen on getting a bargain, but issues will inevitably arise when brands and retailers return products to full price, says Gabriella Santaniello, founder of retail research firm A Line Partners. "There is going to be a point where you have to preserve your margins and get the product back to regular prices, but what are customers going to do then?"

Finding alternatives

Traditionally, luxury brands have relied on specialised outlets to get rid of excess stock, allowing them to sell collections generally at least a year after their release. Mario Ortelli, managing partner at Ortelli&Co, says brands could send some Spring/Summer items directly to outlets this year, after evaluating what they can bring back next season or use in their resort drop. Bobby Stephens, leader in Deloitte Digital's retail and consumer products practice, sees luxury brands moving stock to regions that are performing better, like China and South Korea. In a call with analysts in April, Kering CFO Jean-Marc Duplaix said that the company was reallocating inventory across regions, shipping from European stores to Asia for example, and postponing deliveries on the Spring/Summer collection to prolong the full-price selling period. "We are not yet in a situation where we are prepared to buy back products, however, it's a global negotiation," Duplaix said.

Independent brands, which don't have the option of reallocating stock in different regions given their smaller footprint and costs, are coming up with alternative methods, including limited drops and online sample sales, to avoid traditional discounting patterns.

London-based Rejina Pyo has run limited, 24-hour sales drops tied to specific products using promotional codes on Instagram, usually redeemable only by the first 10 followers to use them. New York-based Mara Hoffman held a week-long flash sale early into lockdown in March before returning all products to full prices.

Hoffman and other designer brands including Alexander Wang, Ganni, Proenza Schouler and Kara turned to archive sales, marking down stock from past seasons without undermining the value of the current collections. As most physical outlets are still closed and offline sample sales are out of the question, many brands resorted to sample sale platforms, like Curate Sales and The Box, that have moved online or opened a dedicated section on their website. "We always wanted a separation of church and state before, but we are not interested in that right now. We are letting people get a range of price points," says Amy Smilovic, founder of Tibi, of adding a permanent sale section on the site.

In China businesses and local governments gave away vouchers as lockdowns eased in March to encourage consumption across sectors, including retail. Vouchers usually give an additional amount to the consumer to spend on the brand or in store once they have already spent a specific amount. They are beneficial in the short term, as they have less of an impact on brand's margins, but are still dependent on consumers having discretionary spending. "As long as people are living with job and economic insecurity, that is going to prevent spending," says Doug Stephens, founder of agency Retail Prophet.

As a brand, one way to limit the damage of markdowns is to communicate clearly with the customer about why you are discounting. "Make it as clear as possible to consumers that this is a limited time discount, not in order to drive a bunch of demand, but just to set the expectations that this is an unprecedented time and we can help each other out together," says Deloitte's Stephens. Womenswear brand Reformation used this strategy to advertise a week-long 30 per cent sale on Instagram last week, accompanying the announcement with the message: "Something for you guys to enjoy, but we also really need to do this if we're being honest."

Fixing problems at the source

Conscious of the inability to solve inventory and discounting issues in the short term, brands are rethinking production for the longer term. Tibi's Smilovic has started producing selected items according to non-committal pre-orders she takes via the brand's Instagram page, an initiative that has been welcomed both by customers and her manufacturers in Europe. She envisions future collections narrowed down from four to two per year, accompanied by smaller, community-tested drops - as a result, the brand will be producing "far fewer clothing". Canadian denim brand Duer has been testing a similar strategy, offering customers a choice of models and going ahead with production only when they see commitment to purchase.

Tied to the two designer coalitions' call to overhaul discounting is a push to fix the fashion calendar to make collections more meaningful, whether by reducing their number throughout the year, reducing the number of samples or holding them in a more timely manner to allow deliveries to tie in with seasons. These changes will also require a rejig of the supply chain, which, as in changes towards sustainability, can be easier and faster to implement for smaller independent brands that have more nimble operations and fewer stakeholders. The same is true for vertically integrated larger brands, which own their manufacturers, or those who make most sales through owned channels. "Brands that sell 85 per cent of their collections retail and 15 per cent wholesale have the ability to make their own calendar," says Ortelli.

Upcycling goods is another more sustainable way to deal with all the inventory in the fashion system; excess has pushed Ganni to figure out how to use unsold stock and fabrics.

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More from this author: Should fashion freelancers unionise? What buyers want from digital showrooms Covid-19 has emphasised the importance of brand transparency

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Fashion's alternatives to the discounting trap

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When two different coalitions of industry players announced their proposals to overhaul the fashion calendar last week, both groups addressed the industry's discounting problem. The coalitions called for less frequent and extreme markdowns; since the aftermath of the economic crisis of 2008, discounting periods have crept up from end to mid-season, making markdowns the norm rather than the exception and nibbling at brands' margins and perceived value.

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EBITDA rose by 43.7% TO €194m. The retailer reduced its net financial debt by €131m (£113m) to €184m (£159m).

Online sales grew by 26.7% to €564m (£490m) and now make up 23.7% of total group turnover. During the year, Mango invested €58m (£50m), most of which was allocated to accelerating its digital transformation.

Mango's chief executive Toni Ruiz said: "2019 has been an extraordinarily satisfactory year, in which we achieved the highest sales figure in our history and we have obtained the largest increase in profit in a single financial year. These excellent figures are the result of the effort and the great work of all of us who form part of Mango and will allow us to continue to build the company we want to be in the future.

"Our financial situation is better than it has been for many years. Today we are able to repay all the debt the company generates in a single year. Our goal is to continue reducing it, but without renouncing projects that will increase our profitability."

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EBITDA rose by 43.7% TO €194m. The retailer reduced its net financial debt by €131m (£113m) to €184m (£159m). Online sales grew by 26.7% to €564m (£490m) and now make up 23.7% of total group turnover. During the year, Mango invested €58m (£50m), most of which was allocated to accelerating its digital transformation.

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The impact of Covid-19 is being felt worldwide, in every garment-producing nation, and on every high street here in the UK. The fashion and retail industry is facing extreme uncertainty, and sadly, it is likely to be a case of "survival of the fittest".

Some retailers, and their suppliers, who were already weakened by the effects of reduced consumer spending, will find it very difficult to survive.

Buying departments, too, are suffering - entire teams are losing their jobs, some individuals are having offers of new positions withdrawn, and most retailers are furloughing staff and enforcing recruitment freezes to mitigate their losses.

Supply chain victims

It is further back in the supply chain, however, where even greater tragedy is unfolding. As retailers cancel and suspend orders to try to save themselves, it is the suppliers, and more critically, their workforce, who are bearing the brunt of the sudden halt in cashflow. Millions of garment workers will potentially lose their jobs and their means of feeding their families.

As buyers, we first need to act with empathy and compassion. The most successful buying departments are those that have built really strong, professional supplier relationships, and it is the strength of these relationships that will be tested now. We need to work together with our suppliers to ensure they still exist when the pandemic is (hopefully) over, and Christmas is upon us.

Retailers who have been unable or unwilling to pay for stock during the crisis will suddenly be tearing down walls and demanding faster turnaround to try to recoup their losses. If the retail industry wants a supply chain to return to, it must be innovative and creative in the way it deals with the crisis now.

We expect our suppliers to be socially and ethically compliant - should they not be able to expect the same from us?

Payment terms, which many retailers are currently extending to 120 days, and some taking increased discounts, or cancelling orders altogether, could be very problematic in the longer term. Factories and suppliers in Bangladesh, for example, will be unable to fund the purchase of fabrics and trims up front, when they have zero cash in the business.

Potentially UK retailers may have to consider returning to doing business on letters of credit, or buying the raw materials themselves, at least in the short term. Both options are more costly and more labour intensive, and could possibly be avoided if we make the right decisions now with the welfare of our suppliers in mind.

Communication key

In the meantime, communication will be key and embracing Microsoft Teams, Zoom and Skype will help maintain that essential face-to-face contact when travelling is impossible.

You might find that this even brings advantages: having regular face-to-face critical-path and product-development meetings, for example, can only be a good thing, and you can involve the whole team, if you are not already

Effective retail product development technology such as a good PLM [product life management] system, and a pattern-creation, fitting and sealing system such as Optitex, will also be advantageous, to limit the need for actual fit sessions, and multiple sets of samples.

Retailers such as Next and Asos, which are already using this technology have seen a dramatic reduction in lead time and the number of samples required, further reducing cost and the impact on the environment.

Virtual reality

Virtual trade shows, digital conferences and video tours are becoming the way forward - at least for the next few months. Shows such as Make It British and Kingpins Amsterdam stepping into the virtual arena.

These events are unlikely to replace the physical shows in the long term: we work in an industry which is based on the touch, feel and fit of the product. However they promise to drive innovation and creativity in different ways, and have the potential to enhance the experience.

So, is that the glimmer of a silver lining in all of this? Does it signal the end of over-production and over-consumption? Will we see reduced costs as a result of new technology, reduced travel and less inventory?

Our industry will inevitably be leaner, and it's likely that we will all be more technically adept. The more pertinent question is: will we return with a business model that is kinder to the environment, our retail supply chain and its employees?

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Comment: We buyers need to protect the supply chain

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The impact of Covid-19 is being felt worldwide, in every garment-producing nation, and on every high street here in the UK. The fashion and retail industry is facing extreme uncertainty, and sadly, it is likely to be a case of "survival of the fittest".

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Chancellor Rishi Sunak has thrown a range of lifelines to British businesses struggling to stay afloat in the Covid-19 pandemic: the C oronavirus Job Retention Scheme furlough programme and its exension; Bounce Back Loan Scheme (BBLS); the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) ( box, below); and a year-long business rates holiday were all unveiled by Sunak over the past two months.

Government figures show that £14.2bn in BBLs have been distributed to more than 464,000 small businesses. CBILS loans, meanwhile, have provided £7.25bn to around 40,500 companies, and CLBILS loans totalling £590m have gone to 86 larger businesses.

That support has been welcome. Without it, swathes of retailers would have been forced to shut up shop for good. But it has not come without strings. The retail industry fears that loan-based support - particularly the BBLS and CBILS - means businesses are taking on unsustainable debts in the face of an unknowable future.

Loans, as well as any deferred costs, such as rent and VAT bills, will eventually need to be repaid. Snowballing costs could place additional strain on businesses, just as they face what is likely to be a deep and difficult recession.

I don't want to take out any loans because I don't want to put the company into debt

Premium footwear brand owner

Trade bodies, including the British Retail Consortium (BRC) and commercial property organisation Revo, wrote to the government in May to sound the alarm about the unsupportable amount of debt facing retail businesses as unpaid bills pile up and income dwindles.

The joint letter read: "For many of both retail tenants and their landlords, utilising existing debt facilities or accessing the government's debt-based schemes, welcome though they are, is proving not to be an option because of the fragility of the retail market and because the burden of additional debt will not be sustainable if they are to survive.

"Feedback from our members suggests that the current offer of reliefs, grants and loans will not be sufficient to stave off the imminent collapse of many businesses, with all the associated job losses, community impact and economic harm."

The industry bodies are calling for the introduction of a Furlough Space Grant Scheme, under which the government would pay a proportion of commercial rent and other fixed costs, to better protect retail businesses.

Finance and professional services body TheCityUK wrote an open letter to the governor of the Bank of England on 11 May, warning that the level of "unsustainable debt" held by British businesses could hit £90bn-£105bn by March 2021. Of this, CBILS and CLBILS lending could contribute £10bn-£20bn. It has warned that the level of debt could inhibit future employment levels and prevent a smooth economic recovery.
Bouncing back?
The types of finance on offer - and the potential challenges attached - vary depending on the size of the retailer. Concerns about taking on debt have encouraged some smaller businesses to seek alternatives to BBLs.

"We haven't taken out any loans as a business," explains the owner of one premium footwear brand. "I don't want to take out any loans because I don't want to put the company into debt. We've received a grant from our local council. It has been incredibly helpful in covering our office rent, which we still have to pay despite the office being closed."

£50,000 doesn't scratch the surface of our outstanding invoices to suppliers

Womenswear boutique owner

Others argue that BBLs are like putting a plaster over a bullet wound for retailers that have large sums of cash tied up in stock that has not sold and have no clear idea of when - or even if - demand will recover.

"The maximum amount you can borrow, £50,000, sounds like a good amount but it doesn't scratch the surface of our outstanding invoices to suppliers," says the co-founder of one womenswear occasion boutique. "We've been left wondering what best to do with it - do we pay one or two of our biggest suppliers in full or try and pay everyone a little bit? We're worried some suppliers will get very aggressive as time goes on.

"The BBL scheme would be better suited to businesses with fixed costs who don't have lots of deliveries of expensive stock at the start of each season, such as a bed-and-breakfast. The crux of the problem is that May and June would have been our busy season, and I can't see any great queues outside the door even when we do reopen."

Some smaller retailers are facing a potential "cash drain" in 2021, argues Bobby Lane, accountant, and CEO of business outsourcing practice Factotum: "A lot of businesses are failing to understand the difference between a grant and a loan. A loan is a loan, and it will need to be repaid.

"Fast forward a year from now and businesses will be trading again but still dealing with the long-term impact of the pandemic, such as poor consumer confidence and a possible reluctance to shop in stores. They'll then be hit by loan repayments and any deferred payments.

"There's a popular misconception that the fact the loans are guaranteed by the government means there's no risk - but that just protects lenders, not businesses. If you can't afford to pay it back, then the business is still liable and will go into liquidation."
Barriers to entry
For some parts of the industry, even accessing the support available has proved challenging. Much of the high street has been unable to tap into government loans for big businesses because of strict tests from lenders.

Many large retailers have been unable to secure loans - as of 17 May, only 86 CLBILS facilities had been approved, out of 496 applications. Although the government guarantees 80% of the loan, lenders are still cautious.

Retail was a particularly stressed sector even before the pandemic

Tim Metzgen, Alvarez & Marsal

French Connection revealed in May that, although it had taken advantage of the Coronavirus Job Retention Scheme and rates relief, it has not been able to access large loan schemes. As a result, it is seeking fresh funding from other potential partners and has warned it could run out of cash over the coming months if it cannot secure additional funding and trading remains subdued.

"We have attempted to participate in as many of the government's support initiatives as is possible," the retailer said. "It has, however, proved very challenging for us, in line with other retailers, to access any other government funds due to the tight qualification constraints that have been imposed. To date we have been unable to access any further funding from these schemes."

Businesses seeking funding under the CLBILS scheme must provide a borrowing proposal that the lender would consider viable, if it were not for coronavirus, and that the lender believes will enable the company to trade out of any short- or medium-term difficulties.

Existing headwinds make this difficult for the retail sector, argues Tim Metzgen, managing director and head of debt advisory at Alvarez & Marsal: "At a headline level, the government support schemes sound great - but retail was a particularly stressed sector even before the pandemic and that means retailers are finding it hard to access that funding.

He explains that although the government will cover 80% of losses on the loan if the bank has followed the right criteria, lenders have to be comfortable that CLBILS loans meet both their own lending criteria, and the government's, to be sure of that guarantee.

Metzgen adds: "Businesses have to prove they were viable before the pandemic and will be viable after - and retail was already facing a whole host of systemic challenges. A wave of retailers have essentially mothballed themselves [during lockdown] and are waiting for shops to reopen.

"When they do, they'll have to cope with all the deferred liabilities - like rent and, further down the line, government support schemes - which will prove a really big challenge for cashflow."

One retail banking expert agrees: "The banks are not going to provide any finance to businesses that they don't believe will be able to repay - if anything, they are extremely incentivised to ensure that this debt doesn't crystallise into a crisis in a few years' time.

"Larger businesses accessing the loans are subject to extensive credit analysis and have to provide detailed trading data. Lenders then look at a lot of other factors - such as what's happened after lockdown in China - to form their forecasts and assess whether the finance package is viable for that business."

He warns that a lot of retailers are still "burning through vast amounts of money" and can only do so for so long before becoming insolvent, adding that "pretty much every high street business has needed some form of liquidity to get through lockdown".

Manchester-based retailer N Brown Group, which owns Simply Be, Jacamo and JD Williams, said in May that it had secured up to £50m in funding through the CLBILS. The group has modelled several different scenarios, including a "severe but plausible option" where sales drop by half in April, May and June and remain significantly down for the rest of the 2020/21 financial year. By planning for these scenarios and with new government financing in place, it believes it can weather the storm.

Ongoing uncertainty

Retail businesses of all sizes will have to think carefully about how to balance increased levels of debt with the need to invest in the future, argues Tim Nicholson, debt advisory director at KPMG: "Retailers must, to the best of their abilities given the uncertainty, think about what the market is really going to look like on the other side of lockdown and the likely speed of recovery to determine what they need in funding to get through the crisis.

"A lot of businesses will have increased levels of structural debt and that means they will have to consider very carefully how to use capital. Retailers will still want to invest in their customer proposition, in stores, in their ecommerce platforms.

"The question is how much do you spend on investing in the business to drive recovery and growth, and how much do you spend repaying some of the debt you've taken on? That's an inherent tension. What we saw after the last financial crisis in 2008 is that those that didn't invest fell behind the rest of the market."

The difficult balance of investment and paying down post-coronavirus debt will loom large for retailers, even when the pandemic lockdown ends.

What government loans are available to retailers?
Bounce Back Loans
Designed to help small and medium businesses access finance quickly, Bounce Back Loans allow firms to borrow between £2,000 and £50,000. No repayments or interest fees are due in the first 12 months and the government guarantees 100% of the loan.
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme helps businesses with an annual turnover of up to £45m access up to £5m in finance. As with Bounce Back Loans, the government pays any interest or fees for the first 12 months and guarantees 80% of the loan.
Coronavirus Large Business Interruption Loan Scheme
Larger businesses can seek help through the Coronavirus Large Business Loan Scheme. Those with a turnover of over £45m can access up to £25m of finance and firms with a turnover of more than £250m can apply for up to £200m. The government guarantees 80% of the loans. Businesses that access more than £50m in finance from CLBLIS will face restrictions on executive pay, bonuses, dividends and share buyback schemes until the loan is repaid.

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How will fashion retail manage its Covid-19 debt burden?

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Chancellor Rishi Sunak has thrown a range of lifelines to British businesses struggling to stay afloat in the Covid-19 pandemic: the C oronavirus Job Retention Scheme furlough programme and its exension; Bounce Back Loan Scheme (BBLS); the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) ( box, below); and a year-long business rates holiday were all unveiled by Sunak over the past two months.

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The Reopening High Street Safely Fund will support English councils in introducing the necessary safety measures to help stores reopen once lockdown restrictions are lifted.

This includes new signs, street markings and temporary barriers. Councils will also be able to use the money to develop local marketing campaigns and explain new safety protocol.

The new fund has been allocated to councils on a per capita basis and will be available to spend from 1 June. Allocations range from £35,000 for Rutland Council to £1m for Birmingham Council.

Prime minister Boris Johnson said yesterday that non-essential stores in England will be allowed to reopen from 15 June. This date is contingent upon medical progress against the virus and requires businesses to be "Covid Secure", under the terms of updated government guidance.

High streets minister Simon Clarke said: "As we begin to slowly return to normality, the re-opening our high streets will be key to kick-starting our economic recovery. Levelling up the regions and supporting our high streets has always been central to the mission of this government.

"Many businesses have already introduced creative ways of trading such as contactless collection or taking orders by instant messaging and shows that they are ready for the challenges ahead. That's why we are providing an extra £50m for councils to support a range of safety measures that will help get these businesses back on track and ensure that people can enjoy their time visiting their local high street safely again."

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Government launches £50m high street recovery fund

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The Reopening High Street Safely Fund will support English councils in introducing the necessary safety measures to help stores reopen once lockdown restrictions are lifted. This includes new signs, street markings and temporary barriers. Councils will also be able to use the money to develop local marketing campaigns and explain new safety protocol.

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At that date it expects to be operating 281 stores globally, representing 79% of its total selling space.

The company said it is still awaiting further clarification and local government guidance regarding reopening dates for stores in Northern Ireland, Scotland and Wales.

Primark said it is closely following all government safety advice and applying experience gained from its store reopenings across Europe.

Safety measures include:
A "strict" social distancing protocol:
* Limits on the number of customers allowed in store at any one time to allow for the appropriate distance in between customers and employees, following government guidelines.

* Clear signage and floor decals, as well as dedicated employees and additional security staff, to guide customers through the store in a way that limits contact with others.

* Every second till will be closed to allow more space between customers and between employees.
Personal protection for employees and customers:
* Hand sanitiser stations will be made available at the entrance and on the shop floor and back of house for employee and customer use. Face masks and gloves will be made available to all Primark employees.

* Perspex screens have been installed on tills to protect customers and employees.
Increased in-store cleaning:
* The frequency and rigour of store cleaning will increase, particularly around high frequency touchpoints such as tills, escalators, lifts, and employee areas in back of house.

Primark CEO Paul Marchant, said: "We know that life for our customers is going to look different for a while. We want our stores to be safe and reassuring places to shop and work. While it might take a little longer to get into our stores, once inside, customers will find all their favourite Primark products and we have worked hard to make sure that clear signage and extra help will be there to guide them through the changes we have made to allow for social distancing.

"We will adopt all government safety advice as a minimum in our stores and have benefited from our experience in the other markets in Europe where we have already opened successfully. As we open, we will continue to look at best practice across the retail sector and amend our measures appropriately.

"I would like to thank all of our colleagues and partners for the commitment, strength and resilience they have shown through these challenging times."

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At that date it expects to be operating 281 stores globally, representing 79% of its total selling space. The company said it is still awaiting further clarification and local government guidance regarding reopening dates for stores in Northern Ireland, Scotland and Wales.

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The run-up to the lockdown was awful. We could see there were going to be mass retail closures and we tried to get out of as much fabric commitment as we could.

What sells in February does not sell in high summer, and what's the point of just making garments if they don't sell? Hardly ethical and hardly sustainable.

Our core client is Asos, and we worked hand in hand with the buyers and the sourcing team. They paid us for stock that was in WIP [work in progress], as well as finished stock but not delivered.

Asos staggered the payments over a six-week period and in turn we held stock in boxes, and carried on finishing off the garments until they were needed. We only ever have orders that are a maximum of six weeks ahead, so flexibility and nimbleness are our middle names.

Next, I had to think ahead for the machinists - many of them single women with children, and they come from 12 different countries. I lost sleep trying to find a way forward to ensure they had work and had to change the factory to ensure it was safe, too.

We were lucky: we had referrals from retailers such as Next, Asda and Tesco, and before we knew it we were liaising with Alexandra (supplier of scrubs to the NHS), which is owned by US company Dimensions and making thousands of scrubs and gowns per week.

For us this has been an amazing experience: continual flow, and the machinists picked up speed and enjoyed the constant repetition. We didn't ever pressurise any of our machinists to come in. Even now 25% of our machinists do not want to come in to work, and there's no way we are flexing our muscles and insisting that they have to come back.The government's furloughing scheme has been excellent for us and has definitely safeguarded jobs.

For the rest of the business it was not such an easy ride. We have had to furlough 80% of our staff, so that means the Fashion Studio service stopped for the smaller brands. The pattern team, and also the tutors and technicians in the Fashion Technology Academy have also stopped. We have totally lost momentum on these areas.

One of our contracts, however, is N17 Creative Callings for the Greater London Authority and we have had an unexpected result providing our employer-engagement seminars on Zoom. We now have more than 65 new designers in each class. Before we could have only reached a maximum of 20, so that's a new successful angle for us.

If you came today, you would see Covid-19 service stations for sanitisers, masks, gloves and a trendy-looking thermometer (these are so expensive, and we had to get four of them in total). We have a one-way system built in and yellow markings for the 2-metre social-distancing rules.

Toilets have signs stating only one person at a time and all doors are wedged open too. We also had to create a new factory Covid-19 policy then implement it with an increased risk assessment - it's all time and it's all additional costs, but sometimes you just have to get on with it and make the best of bad situation. I applaud the staff, who have been amazing and we all just wanted to do our bit for the glorious NHS.

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Comment: Opportunities and threats from the Covid-19 crisis

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The run-up to the lockdown was awful. We could see there were going to be mass retail closures and we tried to get out of as much fabric commitment as we could. What sells in February does not sell in high summer, and what's the point of just making garments if they don't sell?

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LONDON, United Kingdom - The fear that robots will one day take our jobs is almost palpable across many industries today. Fashion is no different, with technology set to shift the current apparel sourcing model to such an extent that the supply chain as we know it may soon cease to exist.

On the one hand, the so-called "march of the machines" puts a staggering 231 million jobs at risk across 50 countries for manufacturing as a whole, according to the McKinsey Global Institute. But on the other hand, it allows an industry to restructure its data and operations, move factories closer to market, reduce transport costs and emissions, build up a more skilled labour force that is potentially treated more fairly, and focus more closely on individual customer needs.

Today's sourcing revolution can be divided into two main areas. The first is digitisation, which links software patterns in a streamlined fashion and digitally houses all information, allowing cost analysis to be done at high speed and digital renderings of products to reduce the need for expensive prototypes.

The second is automation, which replaces humans on the factory floor with robots and therefore allows the manufacturing model to move away from low-cost labour countries towards those that are geographically closer to the end market.

The rise of both forces makes for a significant transformation as fashion manufacturing has traditionally been a globetrotter, with brands and factories hurtling from country to country in search of ever-cheaper workers. But a new report, "The Apparel Sourcing Caravan's Next Stop: Digitisation", suggests that a global supply chain dominated by low-cost labour could one day be replaced by a different model altogether.
A Revolution in the Making
"The fashion industry used to have a very specific sourcing process," says Achim Berg, co-author of the report and co-lead of McKinsey's global apparel, fashion and luxury practice. "The old paradigm in sourcing was always, 'Let's get it cheaper, let's go to a less-developed country', which is why fashion manufacturing moved from the West to Eastern Europe, to China and now to Southeast Asia and Africa. It has been the caravan of sourcing.

"But the reality is that we're now reaching a limit in terms of finding 'the next country'," he continues. "And we're also reaching a limit in the kind of transactional relationship companies can have with vendors. Everyone is looking for increased transparency, shorter lead times, and more flexibility, and the next big thing will be increasing productivity. All of that you can only change if you collaborate with a smaller number of vendors, and it is digitisation that will make that entire process more efficient."

In an era of instant gratification and with an industry increasingly dominated by digital influencers, speed to market and customisation have become more important for some fashion players than cost alone. This is why the sourcing revolution is set to impact high street brands as much as luxury ones, with the former speeding up mass production times, and the latter using automation to customise pieces in order to afford to continue manufacturing in high-cost countries such as France and Italy.

I see small players having a hard time as it is a case of bigger budgets, bigger benefits.

"It's not about luxury versus mass so much as big companies versus smaller ones, as this will require money and expertise," says Berg. "I see small players having a hard time as it is a case of bigger budgets, bigger benefits."

As a result, factories and brands that are unable or unwilling to change their model to incorporate digitisation into their daily operations and automation onto the factory floor will find themselves stranded far from their markets.

"With lead times getting shortened, manufacturing will need to move closer in, but transferring to higher-cost production companies would usually have a direct impact on the price of goods," says Berg, referring to a renewed focus on proximity sourcing over reshoring.

"[This] is why both digitisation and automation make a lot of sense," he continues. "We don't believe it will bring mass production back to the West, as that concept is driven by nationalism and not for rational reasons. However, it's ideal for neighbouring manufacturing countries such as Turkey and Mexico [which are close to big consumer markets like Europe and the US]."

Conversely, the digital sourcing revolution could also have a positive impact on China, which is currently a world leader in this area. However, China has also watched brands move elsewhere due to rising domestic wages. Digitisation will allow Chinese manufacturers to streamline their costs, while automation will fit more closely with the needs of their increasingly skilled but ageing workforce.

"This will help in China, where factories will employ fewer people but more high-paid technicians," says Edward Hertzman, the founder of website The Sourcing Journal. "China is getting more expensive, which is great for their quality of life - they want seamstresses to one day become technicians, and this change will create a lot of jobs in the engineering space."

East Africa is predicted to leapfrog ahead as big players don't want to repeat the same mistakes when it comes to ethics or sustainability. As a result, when Chinese and other owners open factories in Africa, many will build a modern factory fully incorporated with digitisation.

But how soon will this sourcing revolution actually come? And how urgent is it for those in the apparel-manufacturing sector whose livelihood depends on it most?

When McKinsey surveyed chief purchasing officers of apparel companies, most believed that automation is coming fast. More than 60 percent of respondents believed that automation will be a major driver of sourcing decisions instead of labour cost by or before 2025. Nearly all the rest believed it would happen by 2030. Only a few sceptics doubted that automation would become the key decision driver within the next 20 years.

While increased automation is an inevitability, and this may sound like a bleak prognosis for many manufacturing workers, the sourcing revolution should in theory improve labour conditions for those who remain in employment, placing a higher emphasis on skills and training.

"I am not so worried about jobs lost in manufacturing as new jobs will be created when we transform along the current trajectory," says Wilkie Wong, the managing director of global sourcing for the Esquel Group, which produces garments across several Asian countries for brands including Ralph Lauren, Tommy Hilfiger and Nike.

"In the factories, we will need more engineers and technicians supporting the workers. We will need more analysts and data scientists to study the data. Also, if we become more competitive, our business will also grow, thereby allowing us to redeploy our people to areas where they are most needed."
Increased Speed, Agility, Flexibility and Productivity
Putting aside any impact on the workforce, digitisation holds far more appeal than automation for manufacturers like Gerhard Flatz, the managing director of China-based apparel manufacturer KTC that has attracted performance brands like Rapha, Mammut and Gore Running Wear.

"Sourcing digitisation will allow the customer to speak far more loudly," he says. "One day soon, people will order customised goods through their mobile phones, which will then be digitally sent to the factory, where a machine will cut the to the exact shape they requested, and a skilled seamstress will finish the job.

"People forget that a lot of human knowledge is necessary in apparel manufacturing and at the moment it is still much cheaper to use human capital than to start building robots."

Rob Sinclair, president of supply chain solutions at Hong Kong-based sourcing giant Li & Fung, agrees, suggesting that digitisation will take the focus away from the buyer and place it firmly on the customer.

Sourcing digitisation will allow the customer to speak far more loudly.

"Historically a store buyer held the power of decision making," he says. "They decided what to buy and how many units. With digitisation, through transparency and websites, consumers are making that decision, which means brands can now focus on the consumer. This in turn will lead to consumer intimacy on a very personal level."

Li & Fung, which has undergone a challenging couple of years, is currently investing heavily in digitisation for reasons ranging from streamlined operations and greater transparency to predictive analytics in production and the important impact digital design will have on reducing costly prototypes. Li & Fung is not yet focusing on automation, largely because they do not own the factories they work with.

However, Sinclair is more hesitant about the suggestion that digitisation will lead to a physical shift in manufacturing. "Digitisation and geography are not mutually independent, but they're not that closely linked either," he says. "Digitisation coupled with automation will make manufacturing closer to end market more plausible. But it is not one size fits all. Certain brands will move down the automation journey faster than others, and we're not going to see the entire industry change in one go."

Hertzman, by contrast, believes the opposite, predicting major geographic relocations within the next two decades. "The landscape will be very different," he says. "In the next five years I don't see much change, [but] in the future, if we get to the perfect solution, there will be no inventory at all, as everything will be made on request as close to home as possible.

"Marquee brands such as , H&M and Macy's will find a way to stay relevant by creating a different shopping experience that allows customers to try something on in store, which is then customised with the help of AI and made nearby," he adds.

While sourcing digitisation is certainly an ongoing revolution that is propelling many fashion manufacturers into action and leaving others behind, Sinclair believes it is not the end game either.

"It's just the new super highway. It is the new enabler and a current of electricity in our industry, but once everyone is digital it is just a new playing field," he says. "It's what is after digitisation that is the [even] bigger question."
Related Articles: Is 'Nearshoring' the New Offshoring? The Robot Opportunity What China's $1 Trillion New Silk Road Spells for Fashion

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LONDON, United Kingdom - The fear that robots will one day take our jobs is almost palpable across many industries today. Fashion is no different, with technology set to shift the current apparel sourcing model to such an extent that the supply chain as we know it may soon cease to exist.

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We are facing a huge question mark. We really do not know what we could face over the coming weeks. The summer months in Italy are usually very busy with tourists - that's something the country's economy relies on, and we will suffer from the absence of that kind of business. When it comes to social distancing, we've taken all the precautions the government has imposed - wearing gloves and masks, sanitising the stores, offering hand sanitiser at the stores - but we'll have to wait and see how it impacts store footfall.

Preparing for social distancing in stores has been challenging in the sense that it is new and we've never done it before. The big issue is that we just don't know how long this is going to last. We want to take effective measures while remembering this could be a temporary problem. We're training staff and making sure everyone in the business understands the potential challenges ahead.

The big debate now is how to avoid a new lockdown, because is it clear that going into another would not be affordable economically.

We have stores across pretty much the whole of Italy, and the situation with the virus varies from region to region. Places such as Lombardy still have a problem with coronavirus infection, but there are areas in southern Italy that seem to have it under control.

How and when stores will reopen will therefore vary. The government allowed the economy to restart from 18 May [retailers, restaurants, hairdressers, and cafes were allowed to reopen] but the lasting impact of lockdown on the ecosystem of our high streets has yet to be seen. What we do know is that we will follow regulations closely and work on a daily basis to improve what we're doing when it comes to hygiene measures.

If we look at the global situation for Replay, we currently have around 30 stores that have reopened and 56 stores closed. What we've found from the reopened stores is that footfall is lower, but conversion is higher. People who are going to stores are going to buy: they're not window shopping.

There are two types of consumers coming out of lockdown: those are scared to go out to crowded places so will shop online and those who can't sit at home any longer.

I've realised that I like travelling a lot - I used to complain about it but now I miss it! On the business side, I've learned that you have to try and take a common-sense approach to very situation, no matter how unexpected it is. You can't let the uncertainty produce panic.

You also can't try to over-plan for every scenario in this kind of situation because there's so much we don't know. What I've tried to do on a daily basis is prepare the brand to reflect consumers' changing attitudes and lifestyles. We've tried to be proactive and keep our offering relevant to them - having the right product is what will make the real difference.

The best plan a business can have today is to be fast. Replay is being as flexible as possible in our approach, gathering information quickly and sharing it with all the senior management team. We're being flexible when it comes to the product assortment and our messaging, and trying to work as closely as possible with partner marketplaces and our factories to serve the customer as best as possible.

The virus has hit not only businesses, but the entire economies of countries, and consumers are very aware of that. They are demanding the very best product made in the best possible way. Credibility and transparency will be even more important going forward. Consumers will want to live in a better world once the pandemic is over, and that will include clothing. Being sustainable in today's market is a must: it is almost a consumer right.

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Coronavirus lessons from an Italian fashion CEO

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Matteo Sinigaglia is CEO of denim label Replay. Born in Padua, northern Italy, and now based in Treviso, he talks to Drapers about how Italy is lifting lockdown and what British retail bosses can learn from their counterparts in Europe.

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Philip Green | Source: Shutterstock

By Reuters September 6, 2019 15:23

LONDON, United Kingdom - British retailer Philip Green's Topshop-to-Dorothy Perkins fashion empire reported an after-tax loss of £169 million for the year to September 1 2018, which it blamed on a trading environment that had changed dramatically.

Arcadia Group, which is ultimately owned by Green's family, staved off collapse in June when its creditors narrowly approved a plan to close stores, cut rents and change pension scheme funding.

Accounts filed by holding company Taveta Investments Ltd showed turnover fell 4.5 percent to £1.81 billion, while operating profit fell to £78.1 million from £124.1 million a year earlier.

It recorded exceptional items of £217 million, contributing to the £169 million loss, which compared to a profit of £49 million a year earlier.

"The retail landscape has changed dramatically over recent years and the increased competition from other high street and online retailers in particular has had a significant impact of our performance," the company said.

However the group said that after coming through a challenging year, it was very clear on its strategic direction.

Auditor PWC noted in the accounts there were a number of matters, including for example external market conditions that could potentially be impacted by Britain leaving the EU, that might cast "significant doubt" about the group's ability to continue as a going concern.
By Paul Sandle; editor: James Davey.

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Philip Green's Arcadia Slumps to £169 Million Loss

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Philip Green | Source: Shutterstock By Reuters September 6, 2019 15:23 LONDON, United Kingdom - British retailer Philip Green's Topshop-to-Dorothy Perkins fashion empire reported an after-tax loss of £169 million for the year to September 1 2018, which it blamed on a trading environment that had changed dramatically.