How coronavirus affects fashion industry

Go Mobile prepared a selection of news related to coronavirus! We researched the fashion industry in times of COVID-19 and want to tell you everything you need to know about it: losses, digital transformation, mutual assistance, and promotion. An additional bonus: data from our clients that are operating in this industry.

Let’s start with the good news

• We didn’t stop buying clothes for home and sport. Nowadays people are searching for sweatpants (+235% YoY) and cashmere hoodies (+340% YoY) more often.
• Experts believe that minimalistic and comfortable clothes are going to stay with us even after the quarantine.

But in general, the industry is suffering and purchasing power is declining

• Coronavirus caused factory shutdowns and the mass cancellation of fashion shows.
• 30% of fashion brands, retailers and manufacturers were unprepared for the crisis.
• More than 70% of European and American consumers are going to decrease their spending on clothes.
• Worldwide clothing sales fell by 60%-70% from April to May.
• By mid-March Inditex (Zara, Bershka, Pull&bear etc.) temporarily closed 3785 shops worldwide.
• Brands started to gradually open their stores in April-May.

Luxury brands are also struggling…

• Luxury goods sales might potentially decrease by $85 billion-$120 billion or 29%.
• LVMH Moet Hennessy Louis Vuitton SA revenue dropped by 15% in the first quarter of 2020.
• A similar decrease (15.4%) was reported by french retail chain Kering SA that owns Gucci, Bottega Veneta, YSL, Balenciaga, and other luxury brands.
• American luxury retailer Neiman Marcus filed for bankruptcy.
• The Head of LVMH is now considered the most impoverished person in the world because of coronavirus. His net worth decreased by $30 billion dollars.

… but are actively donating funds (and production capacities)

• LVMH became a trendsetter when the company announced, that it is going to produce sanitizers and send them to the French hospitals for free.
• Chanel and Burberry launched the production of medical masks and gowns.
• Guess donated more than $1.3 million to combat the pandemic.
• Capri Holdings (Michael Kors, Jimmy Choo и Versace) will donate more than $3 million to fight against COVID-19.

The situation is quite ambiguous for the online-retailers

• Amazon stocks went up 25% since the beginning of the year.
• 64,5% of businesses decreased their online activities during the pandemic.
• Revenues of online-retailers dropped by 30% in March, but in April they increased by 21% in comparison to the previous year.

Fashion is forced to adapt to new digital realities

• The fashion industry started to pay more attention to virtual clothing and virtual models.
• Fashion weeks are held digitally more often (for example, fashion weeks in Shanghai, London).

Go Mobile Data

We analyzed the activities of our clients that we are including in the Fashion segment. We decided to compare data from November 2019 to the data from April 2020.

The number of our clients in the Fashion segment doubled over the last several months.

60% of all current fashion-clients of Go Mobile ran ad campaigns during autumn, marketing activities of the rest of these clients (conducted by our agency) were on hold. During the first quarter of the year, the total number of clients in this segment doubled, but by April 70% of them stopped their advertising campaigns.

But the average budget of a fashion client increased by approximately 30%. An interesting fact is that the share of the segment in total agency billing almost didn’t change.

The reaction of our clients to the pandemic

Among our clients, online retailers and businesses with delivery services feel more secure than the others. Coronavirus brought them cheaper auction and the best months in terms of the cost of media buying. They spotted sales decrease and fluctuations in the distribution of orders between desktop and apps, but interest in such brands increased.

We decided not to change proven strategies of media buying significantly for these brands. We just added creatives with new USP: contactless delivery, seasonal promotions, etc.

It should be also mentioned that retailers with suppliers from China stopped their advertising activities in the early stages of the epidemic spread because of the fuss on social media.

Luxury goods distributors are expectedly losing their profits and postponing all activities until the situation is resolved. Because of pandemic approaches had to be re-evaluated and many pre-planned campaigns had to be put on hold. One of our clients even had to downsize its marketing team and reduce all activities.

The general trend for fashion brands is the abandonment of special projects and other media formats in favor of performance marketing and retargeting. The entire e-commerce industry is responding to the crisis by cutting costs on positioning in favor of working on the attraction and retention of customers right now.

What will happen next

The exit from the crisis is going to be long and gradual. Several factors will contribute to it: a decrease in the purchasing power, a trend of conscious consumption, and a more thoughtful approach to the purchases after a long quarantine. Sustainable fashion was a hot topic in recent years, but COVID-19 significantly increased its popularity.

In China luxury retail is booming after the end of quarantine. For example, the Hermès boutique in Guangzhou earned $2.7 million dollars on an opening day. However, experts predict that the overcompensation wave will be short. The #ditchyourstuff trend is getting more and more popular instead. Chinese youth are rethinking their attitude towards shopping. They started to sell out unnecessary clothes and plan to spend a lot less money in the future.

Market players are slowly digitalizing even if they have no other choice. So far, everything indicates that offline stores will remain one of the most important sales channels. But it is still not quite clear how shopping malls are going to operate after the quarantine is over.

The Business of Fashion and McKinsey assumes that partnerships between brands are going to be the main force in the fight against the crisis. In order to overcome the consequences of the epidemic, competitors must share data and create strategies together.

Advertising budgets are going to increase with the recovery of the industry. After focusing on performance channels, many companies will rearrange their budgets in order to maximize reach. Those brands that are not going to stop their marketing activities during the epidemic will be able to get more loyal customers after it.