It doesn’t take a genius to note that now is not the ideal time to launch a new fashion business. If you are launching your new business, this season, you probably started way before this disaster of a virus appeared and it was too late not to see it through. Too much time and money has been invested to pull out. You’re not a quitter.
Left - In September, MATCHESFASHION launched its The Innovators Programme to help support young designers
It’s a bit like all those cranes on the skyline and builders finishing off their dense blocks of luxury flats. It’s too late to down tools, not finish them and get them on the market. But, fast forward six months and how many spades will still be in or breaking new ground?
There will a gaping hole of projects starting and the fashion business will have one of the largest.
The V shaped, bounce-back recession is ideal because it conserves this economic momentum and it just becomes a blip. Sadly, it’s not looking that way. There is still momentum in the market, but the longer Covid disrupts everything, momentum lessens, and the more time and energy it will take to get it all moving again. This will also make this gap even larger.
Fashion has a time lag. The time between starting and producing samples, to then show, get orders, make and then sell, and then get the revenues, is usually a long timeline. It’s a risk and nobody knows what the state of the market will be when you launch, even at the best of times. Today, many of those thinking about striking out alone and setting up their own thing will choose to put off starting well into next year when they can feel more confident about the economic landscape.
Without trade shows and fashion weeks - a vehicle to showcase to buyers - many stores and websites will reorder previous years’ product, with tweaks, from existing brands. This will only really start to show when SS21 hits the stores after Christmas and consumers will start to notice.
Fashion’s reason to be is newness, or the perception of newness, and a never ending supply of new brands and designers kept the whole industry feeling fresh and new, while established brands and giant luxury groups took most of the sales and profits.
Luxury multi-brand websites and department stores need newness to give vitality to its entire offer. It’s news, it’s buzz, it’s hype and they had it all without the financial risk. This veneer or gap needs to be filled and retailers and luxury groups are now realising that they will have to start supporting it or it won’t be there.
MATCHESFASHION has launched its year-long ‘The Innovators Programme’ designed to champion young design talent. It was built upon an existing womenswear project to include menswear and is a robust package of practical support including mentorship, preferential business terms and £1.8 million in marketing.
The programme was developed as the MATCHESFASHION team collaborated closely with designers during the Covid-19 pandemic. It became clear that many of the designers were unsure how their brands could thrive through 2020 and that practical support and ongoing commitment was required. The 12 designers are: Art School, Ahluwalia, Chopova Lowena, Stefan Cooke, Germanier, Halpern, Harris Reed, Charles Jeffrey LOVERBOY, Thebe Magugu, Ludovic de Saint Sernin, Bianca Saunders and Wales Bonner. Eleven of these designers were already partner brands and each designer was chosen "for having a unique and powerful DNA which is intrinsic".
“I am delighted that we have formalised our support for emerging talent, developing The Innovators into a programme that actually helps futureproof their businesses in what has been a tough year for the creative industry. I have worked with many of these designers for a long time and I am so happy that we are committing to their visionary collections in a practical, material way.” said Natalie Kingham, Buying Director at MATCHESFASHION. This group of designers will only contribute marginally to MATCHESFASHION’s group revenues, £372 million ended 31st January 2019, but they add far more to its brand as a destination for people who love fashion and a place to discover newness and the hottest design talent. This desire is insatiable and companies need this veneer of young designers and brands. A small financial outlay is worth the newness halo effect
In 2019, Liberty launched its ‘Liberty Discovers’ platform for up-and-coming talent. It supported designers by offering mentorship from the Liberty buying team and exposure opportunities via the brand’s communication platforms and access to Liberty’s two in-house product and fabric design studios, located within its Central London store.
Right - The LVMH Prize fund of €300,000 was split amongst the 8 2020 nominees
As for all the designer prizes, many decided to split the prize monies amongst the nominees due to the pandemic. The LVMH Prize finalists, Ahluwalia, Casablanca, Chopova Lowena, Nicholas Daley, Peter Do, Sindiso Khumalo, Supriya Lele and Tomo Koizumi all shared the €300,000 prize money equally. LVMH also pledged to support previous winners of the prize with a new fund, an undisclosed amount, and the six previous winners of the LVMH Karl Lagerfeld Prize.
In America, the CFDA/Vogue Fashion Fund was renamed ‘A Common Thread’. A Common Thread has raised over $5 million of which over $2.13 million was granted to 44 businesses in the first round of funding, $2.015 million granted to 37 businesses in the second round of funding and $500,000 granted to 47 NYC-based manufacturing businesses in the third round of funding for a total of 128 recipients across the three rounds.
Fashion’s tight production timetable and traditional cashflow model makes it very difficult for small designers and brands to survive. While the giant brands and retailers want to dominate, they also want a veneer of choice and newness. Expect to see many more funds, support and ‘prizes’ to appear from the large luxury groups and retailers.
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Money greases the wheels of our consumerist society. Without this continual flow of finance the economy contracts and many people lose their livelihoods, especially in retail.
It is completely natural, and prudent, to want to save in periods of uncertainty. Talk of entering the worst recession for over 300 years would make even the most optimistic of people think twice about a big purchase or being frivolous with their cash.
COVID 19 has been a tale of two working economies; those, generally, white collar workers working from home, whose wages weren’t affected, saving money on travel and lunches, and those reliant on these workers being made redundant or having their hours reduced. Many workers on furlough have been in an economic form of limbo, and while they have not seen most of their income disappear, this is quickly coming to an end and some will be made redundant. Many of these jobs will not be deemed ‘viable’ in the short term.
Left - Results of website loveMONEY poll
A small poll by the website loveMONEY, in June, found readers say their finances have actually improved under lockdown. A remarkable 23% said they were significantly better off, while the biggest amount, 36%, said things had improved slightly.
At the other end of the scale, 13%, more than one in eight, reported that their finances had been hammered since the lockdown came into effect, while a similar percentage (14%) said they were slightly worse off. Finally, 14% of respondents said their bank balance looked largely the same at the end of each month.
The vast majority of people spent less during lockdown because they had less things to spend money on and most not leaving the house.
According to a study by AA Financial Services, 85% of UK adults spent less during lockdown. The average Brit saved (per month) £49 a month on petrol, £57 by not going to pubs or restaurants, £53 by not going to shops, and significant savings in other areas, totalling £617 a month on average for those still receiving their full income.
The report also found that 31% of people with savings accounts had increased their monthly deposits since the start of lockdown. This was confirmed by Bank of England data, which found that personal bank deposits had grown by three times the recent average. The Bank revealed that consumer debt was down by £7.4 billion, to just half the level seen in February. Those who are benefiting from excess income are in many cases using their spare money to pay down debts, while choosing not to take out new loans due to increased uncertainty.
According to Aviva, women seem to have been affected more strongly with 38% of women vs 29% of men saying they have less money to spare at the end of the month than they did pre-lockdown. This could be due to the types of jobs women do, like part time and in customer-facing roles.
Young adults have also been hit hard. Almost a third of 25- to 34-year-olds (32%) are concerned about their ability to save. This age group is also the most worried about losing their job due the impact of COVID-19 (28%).
Aviva Head of Savings and Retirement Alistair McQueen says: “Female savers look to have been disproportionately affected during the lockdown, as workers in sectors like hospitality and retail are more likely to be younger females. Younger people across the board also face a significant challenge. Those under 34 typically struggle to save under normal circumstances, but the current conditions have exacerbated this. For example, this age group typically spends a greater proportion of their budget on housing, and bills, which remains unchanged.”
In August, there was a big government push to get white collar workers back to the office. Then a recent u-turn, telling people to work from home again with positive COVID 19 cases rising. Many commuters don’t want to go back to that lifestyle and it’s easy to understand why.
DJ Sinfield @BigSino on Twitter said, “I am WORKING from home. I am saving £500+ a month and getting an extra 3 hours a day family time. This money and time is being spent at farm shops, local butchers etc and not Southeastern Trains. Why would I want to go back to commuting? Why?”
John Bye @_johnbye said, “The fact is many of us have enjoyed working from home, and companies have realised they're wasting money on big offices they don't really need. I save £300 a month and 2.5 hours a day by not commuting. Why would I want to go back to a London office full time?” and Paul Chapman @Paul_C-Chapman said, “I am saving around £30/day on rail fares and food, I have 3 hours/day of my life back, I have a much better work/life balance and my health is better. Why on earth would I want to go back to daily commuting?”
With interest rates dropping like a stone for savings, for example, the government backed NS&I just reduced its ‘Income Bond’ from a paltry 1.16% to an almost zero 0.01%, the incentive to save has been reduced. What we need is people to spend our way into a U shaped recovery. We need the people, on the positive side of the COVID recession, with this additional monthly money, to spend it.
This is a call to arms for work-from-homers to spend. It’s not about people spend their savings, it is also not about people spending more money than they would usually, it’s about those with this worker windfall - what they would have otherwise have spent on lunch and travel etc.- to inject that into the economy. It’s tempting to save it, but it’s money they wouldn’t have had on a monthly basis.
Put it into retail and services worth supporting, and retailers and brands they don’t want to see disappear and are rewarded with their custom. This isn’t about lazily rewarding shops or travel companies that aren’t very good or really are past their peak, it’s about supporting new or established businesses which resonate with you and make or provide great services or products.
It could be ethical or green products or services. It could be new business, crowd funding and start-ups. Look at it like an investment in the future you want to see. It’s time to put this bonus money to good use.
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This is a disaster. This will probably be the biggest recession the world has ever seen and fashion and retail is going to get hit hard. What the global spread of coronavirus (COVID 19) shows us is how interdependent our economies have become and what a fragile house of cards it all was in the first place. Those cards are disappearing quickly and the entire thing is coming crashing down.
Fashion brands and companies are in freefall and the current mindset is to cancel everything. Fashion had a problem with unsold inventory well before this. As the industry got bigger and the need for huge quantities to make a profit increased, unsold merchandise and how to get rid of it was a headache for the majority of brands, high-street or ‘luxury’.
It has been reported that garment factories in Bangladesh have now had orders worth more than US$2 billion cancelled by brands and retailers because of the global coronavirus crisis. Orders for nearly 650 million garments, worth a total of US$2.04 billion have been cancelled, impacting on 738 factories and about 1.42 million workers, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Just as the Chinese factories start production again, Europe and US are mostly in lockdown with many shops closed and retailers cancelling orders.
Primark is using a force majeure clause in its contracts to cancel its orders, the Times newspaper said. “We are deeply saddened that this will clearly have an effect throughout our entire supply chain,” Primark Chief Executive Officer Paul Marchant told the newspaper.
While much of the SS20 season would have been made despite the reported disturbances in the supply chain from China at the beginning of the year, it’s not too late to cancel high summer stock or the waves of drops, brands, who don’t want to hold much stock, have become used to. Primark has no online sales, so all that stock will be stuck in stores and warehouses.
“We have large quantities of existing stock in our stores, our depots and in transit, that is paid for and if we do not take this action now we will be taking delivery of stock that we simply can’t sell. This is unprecedented action for unprecedented and frankly unimaginable times,” said Marchant.
Marks & Spencer has recently cancelled £100m in clothing orders.
This is the retail equivalent of cutting off limbs to save the vital organs. Brands don’t know how long this is going to last and what shape they and consumers will be in at the end of it. They need to save cashflow. Fashion feels particularly unimportant right now and will be awash with huge discounts to clear stock in the near future, and that’s in an already saturated market. Brands cancelling orders will impact manufacturing countries hard, but this isn’t a frivolous decision, this is a battle for survival.
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