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The impact of the new crown epidemic on the global textile and garment industry geometry

Issuing time:2020-04-28 10:03

At the beginning of 2020, a sudden new crown outbreak cast a shadow over the global economy, and the textile and garment industry was also severely affected in this environment. On 30 March and 6 April, the International Federation of Textile Manufacturers and the International Clothing Federation jointly issued reports on the impact of the new crown outbreak on the global textile and garment industry.

01 Impact on the garment industry

1. Offline income plummets

The sudden outbreak of the new crown has caused an unprecedented impact on the demand for clothing market. Many governments have called for store closures to avoid crowding, resulting in a 100 per cent drop in turnover. Instead of forcing the closure of clothing stores, the government has also called on people to stay as far away from their homes as possible. McKinsey reported a 30-40 per cent drop in sales at its European brick-and-mortar clothing stores. In areas with severe outbreaks, turnover has fallen by as much as 80 per cent. And online sales can't make up for such a huge loss of offline sales. Online sales remained largely stable, with some e-commerce platforms down 5%-20%.

2. Small and medium-sized brand profit narrows

The negative impact of the new crown outbreak on the garment industry is more pronounced than in other industries, probably because the decline in clothing sales began to show before the outbreak. Coupled with the non-essential properties of clothing consumption, a collapse in sales is inevitable. Consumers in Europe and North America are more likely to stock up on food and DIY products, and buying clothes is not just a necessity. It is worth noting that this kind of pent-up behavior of consumers, or will give the market a signal of consumer saturation. Large online retailers have begun to boost sales with aggressive discounts. At this time the weather warms, in Europe and North America winter and spring season, should have a large consumer demand, large online retailers this behavior will disrupt the market order, further squeeze the market share of small and medium-sized brands. In this special time, we see some industry associations considering asking the government to issue decrees to limit the time period slots available. The European Union for Freedom and Democracy has formally proposed to the European Commission that the policy be implemented in the EU market.

3. The industrial chain needs to unite to face the crisis

In the face of a sudden collapse in sales, many brands and retailers canceled orders. In Bangladesh alone, 1025 factories reported 864 million units as of 17:00 on March 29, and orders worth $2.81 billion were cancelled, affecting the employment of some 2.06 million workers. The negative impact of zero sales quickly spread throughout the industrial chain. Dishonest procurement is also beginning to be common, with brands either giving up suppliers directly or trying to face crises through deeper collaboration. The International Clothing Federation has publicly condemned unethical procurement practices in the spread of the new crown epidemic and called on the industry chain to unite in the face of the crisis. Indeed, what is needed in the context of the crisis is buyers/retailers and their manufacturers, as well as manufacturers and their suppliers, in more creative ways to address the negative impact of the economic downturn on the industry as a whole.

4. Price pressure unpredictable

Offline retail ingress with a complete shutdown and sales can only be restored after the end of the quarantine period. The resumption of retailing depends entirely on the control of the outbreak and the ability to avoid a secondary outbreak of the virus. However, when stores reopen, brands are also facing tricky situations, such as high inventories and depressed market demand caused by the recession. This would require low prices to encourage consumption, which would lead to long-term low unit prices and difficulties in industrial recovery.

5. Digitalors may ease the industry crisis

The new crown outbreak has not had a positive impact on the clothing industry. The development of the industry as a whole bottleneck has begun to show before the outbreak, the direction of the industry needs to improve has been clear, the outbreak at this time, just urge the industry to make changes more quickly. In November 2019, the theme of the 36th World Fashion Congress of the International Fashion Federation, held in Antwerp, was "Transition and Transformation of the International Fashion Industry". The International Apparel Federation had identified the theme long before the outbreak, and industry change was imminent, and now it's on the string. One area that needs to be strengthened is the digitization of the industry. Developing digital products can significantly reduce costs and improve market responsiveness. Additional transportation costs can also be reduced. The new crown outbreak has once again demonstrated that digitization is a major and urgent challenge for the entire garment textile supply chain, and that a focus needs to be placed on its cooperation with the garment and textile industries.

02 Impact on the textile industry

1. Production and orders fall both

To date, little information has been provided on the specific impact of the outbreak on the global textile industry, and market trends can only be seen from a wide range of industry indicators. IHS Markit's March 6 purchasing managers' index article, entitled "The opportunity for a new crown outbreak in February affects all sectors", may also represent the textile industry. The report includes the textile industry in the "home and personal products" category, where the index of output and new orders has plummeted in recent months.

2. Sudden decline in turnover will turn into a longer-term downturn

The only specific source of information on the global textile industry in the new crown outbreak is the 46th newsletter issued by the International Federation of Textile Manufacturers on March 26th, which contains the Association's first survey of the impact of the new crown outbreak on the global textile industry. As of March 25, 25 percent of businesses had received additional orders, about 50 percent had been delayed or canceled (10 percent of cancellations), and about 33 percent had been delayed or canceled by more than 10 percent, according to the survey. In addition, 20 per cent of enterprises expect turnover to increase from 2019, 40 per cent expect turnover to fall by 10 per cent and 40 per cent to be more than 10 per cent (down even 20-60 per cent). Current industry difficulties include the safety and health of workers and employees, supply chain disruption, supply shortages or delays in the garment industry, depressed or significant market demand, and cash flow shortages. However, some companies say the outbreak could help streamline its internal processes and become more powerful. Companies that produce medical and outbreak-related finished and semi-finished products will grow further.

Only three weeks ago, some areas had not been fully affected by the new crown outbreak, but the sharp changes in orders and turnover data reflected a blow to overall demand in the global apparel industry. The continuity of the outbreak will be an important factor in the direction of the industry.

03 Challenges and opportunities

Challenges: Shortage of demand and liquidity

There is a shortage of current demand and/or future demand will be severely shrinking

The lack of liquidity in enterprises

Opportunity: Medical textile products

The company considers the production of related health care and protective fibers, spinning, fabrics and related end products may be new opportunities.

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