Is Fashion’s ‘New Normal’ Made of Local Businesses and Online Retailers?
Hello and welcome to the issue 15 of moderated, a newsletter created to dive into insights and phenomenons in the Fashion Industry. It also has a curation and summary of the most talked last week’s events of the industry, offering further readings for more details.
if you are here for the first time, welcome! I hope I can somehow help you to keep up with the fast-paced Fashion Industry. If you haven’t subscribed yet to receive a weekly issue by e-mail, you can do it by clicking below. It’s fast and free!
In this week’s moderated, I dived a bit into the post-pandemic ‘new normal’ of shopping behaviour. With online and local retailers getting the best out of the lockdown lifts in Europe, I tried to understand if this may be a global shift in buying habits.
But before we jump into the main article, let’s check the last week’s recap of the Fashion Industry.
Last Week’s Recap
The Iconic Designer Kansai Yamamoto Passes Away
The Japanese fashion designer Kansai Yamamoto has died at the age of 76 from leukaemia. Known for his colourful and eclectic creations that incorporated traditional Japanese design into fashion, Yamamoto became, in 1971, the first Japanese designer to show at London Fashion Week. As David Bowie’s stylist, he was the creator of some of the singer’s most iconic outfits, including the ones of Bowie’s alter ego Ziggy Stardust. Elton John, Stevie Wonder, and John Lennon also wore Yamamoto’s clothing.
He had an incredible career, in which he brought a fresh new view to the classic kimono piece, designed an important train in Japan and created ‘super-shows’ that combined fashion, music, and dance to audiences of up to 120,000 people. More recently, in 2018, Yamamoto collaborated with Louis Vuitton, combining his signature elements with LV’s monograms. He left behind a project still to be launched on 31 July, the online streaming event “Nippon Genki Project 2020 Super Energy”. The fashion industry definitely lost a great personality and his memory will always be kept in his beautiful creations. Kansai Yamamoto’s legacy will continue to inspire future generations and the fashion industry.
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LVMH Operating Profits Down 68% In the First-half of the Year
LVMH, the parent company of brands such as Louis Vuitton, Dior and Givenchy, announced its second-quarter results and they were worse than what specialists expected. According to FactSet, analysts forecasted a first-half operating profit of €2.7 billion, but the group was far from this number. With an operating margin of just 9% due to the stores’ closures and travel restrictions, the luxury conglomerate had an operating profit of €1.67 billion in the first half of the year, a dive of 68% if compared to last year. For fashion and leather goods, the drop on revenues was 23%, while profits from recurring operation dived 46% year-over-year. For cosmetics, the impact was slightly lower but still alarming. Surprisingly, watches and jewellery had a softer dive in revenues and profits.
You can check the first-half results’ presentation here and the full report here.
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Digital Fashion Weeks Were Not As Impactful As the Physical Ones
After London, Paris, Milan, and Haute Couture digital fashion weeks, it became clear that this new format is not as impactful as traditional fashion shows. According to tracking firm Tribe Dynamics, none of the more than a dozen major luxury brands that released content for the men’s Milan and Paris fashion or to their resort collections came close to the engagement on Instagram that they had with physical shows last year. On average, the online engagement of digital shows, videos, or presentations was one-third lower than original format shows. The all-digital London Fashion Week had 55% less social media engagement than the January’s edition, according to Launchmetrics. There were a few exceptions, such as the Valentino Haute Couture presentation, according to EMV. This one reached 57% of its online engagement in July, performing better than the brand’s Autumn/Winter couture collection last year. This demonstrates that there is some space for creation in this new format that can perform well. However, physical fashion weeks are being missed by most brands.
To read more about the actual impact of digital fashion shows, check this Business of Fashion article.
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Gianfranco Gianangeli Is the New CEO of Maison Margiela
Last week, the Italian fashion group OTB, which owns brands such as Diesel and Marni, appointed a new CEO to one of its brands: Maison Margiela. The new chief executive is Gianfranco Gianangeli, a former Givenchy, Prada and Bottega Veneta manager. Gianangeli will start at the Parisian brand, which belongs to OTB since 2002, in September and will work side by side with the brand’s creative director John Galliano.
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Keeping Track of Covid-19 Financial Crisis Impact
Ascena Retail Group, the parent company of Ann Taylor and Lane Bryant, filed for Chapter 11 bankruptcy.
Selfridges announces a cut of 14% of its workforce – or around 450 jobs.
Stella McCartney plans on cutting jobs and closing stores after reducing her own salary.
Is Fashion’s ‘New Normal’ Made of Local Businesses and Online Retailers?
Most European countries already ended or eased lockdown measures, reopening retail for consumers to go back to the infamous ‘new normal’. While retail sales appear to be slowly going back to pre-pandemic levels, with a growth of 17.8% in the Eurozone in May, customers are not yet ready to go far from home to shop. What does that mean? Retailers in residential areas or online are the ones getting the sales for now. On the other side, commercial city centres and malls remain struggling to meet their goals. In June, the footfall in Germany’s main streets in Hamburg, Cologne, and Berlin was 50% lower than the previous year, according to the German Retail Federation. London’s West End’s footfall is even worse, 75% down.
The question for now on is if this scenario will persist in the future. 46% of consumers around Europe stated they intend to shop more locally in the long term than they did before the Covid-19 outbreak. According to the research by the German Retail Federation, in Germany, the strongest economy in Europe, a third of 400 brick and mortar retailers surveyed “feel their existence is under threat’. Neil McMillan, director of political affairs & trade at Eurocommerce stated that "If we consider that Germany is a comparatively strong economy in Europe, it's a worrying indicator for the region".
But worrying for who?
Local and online retailers beneficiating from a shift in the market is not exactly bad news for everyone. Online retailers such as Zalando and Asos have been increasing their revenues from this shift in consumption. On the other side, having local retailers, which are very often the ones that most struggled to survive during the lockdown, increasing their sales is a scenario that can bring some newness and freshness to the fashion industry. The fashion conglomerates format made it hard for smaller brands and retailers to conquer space in the industry, but this shift in buying behaviour may be the chance to pass this challenge.
During the quarantine, many countries and organisations held campaigns to promote support for local businesses. This type of message was seen in countries such as India, France, the United States, and Brazil. If in Europe this consumption shift of buying local is trespassing the lockdown period, it may happen in other regions at the globe. For example, a research by TracyLocke Brasil and Behup revealed that 70% of consumers in Brazil changed their shopping behaviour during the lockdown, preferring to buy from local businesses instead of from large companies. Similar researches around the world indicate similar results, so… are we entering a new era where local and online retailers will be the protagonists? It is still early to say, but if local fashion businesses can grab at least a slightly piece of the pie, this outbreak already brought some good changes.
The shift to online sales beneficiated different types of brands and retailers. In the field of online-only fashion retailers, business is booming. Zalando, for example, had a 10.6% growth in revenues during the first quarter of this year, despite the financial crisis. Brands that had a good digital platform managed to soften the Covid-19 impact by selling online – not that it necessarily made they grow in sales overall. Then, you have the brands that didn’t have a good e-commerce platform or didn’t have it at all. These struggled to compensate for the closure of stores due to lockdown. Chanel is one of the brands that have limiting online sales infrastructure. Moncler just sells at outsourced online retailers and is now running to create their own e-commerce for 2021.
African designers were among the most vulnerable to this shift. Due to the continent’s cultural habits of buying more brick and mortar, many retailers and brands did not have any digital infrastructure. Amid this situation, Fashionomics Africa and African Development Bank Group launched an initiative with web series to discuss the plausibility of many digital innovations that would help fashion creatives transition their businesses for a post-pandemic reality. The initiative counted with more than 100 designers and digital innovators from across the continent.
However, there was another group of businesses that can take advantage of this new online moment in fashion: small brands and designers. Indeed, they were the most affected ones by the Covid-19 consequences in the market, but think about: selling online has fewer entry barriers than brick and mortar. For example, platforms such as Etsy, where you can find handmade and vintage products, are growing its sales. Etsy gross profit jumped 24.8% year over year in the first quarter of 2021. This is a whole new public buying from smaller creators, even though there is a large company making this possible. The increase of online sales can beneficiate all brands that build a good platform online and can create an appealing communication, be those booming online-only retailers (which are growing to become the new conglomerates), large fashion groups/brands or small brands.
Thank you for reading this week’s moderated and next Tuesday I will be back with more. If you haven’t already, subscribe below to receive the moderated newsletter straight to your email, and if you really liked it, share this post with friends and family.
Bye-bye and see you next week!
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