By now, the devastating impact of the COVID-19 outbreak on retail is becoming well known. March retail sales fell a record 8.7%, and it appears a virtual certainty that the April numbers will be far worse given that the wide-spread shuttering of “non-essential” brick-and-mortar operations throughout the United States did not take hold until mid-month.
Unloading these results reveals a broad variety of results.
It’s possibly quite the understatement to state that such an enormous deceleration could not have come at an even worse time. Clothing specialty players and moderate outlet store have been facing substantial headwinds for many years, and many entered the pandemic with weak balance sheets and what may be charitably considered unstable liquidity positions. Furthermore, for the high-end section in specific, March and April are the peak months for full-price selling, making them disproportionately vital to success and capital.
Unsurprisingly, merchants have actually been working anxiously with vendors to cancel orders, return currently got merchandise and get special markdown allowances. At one level, this behavior is akin to what took place during the peak of the financial crisis when Lehman Brothers stopped working in mid-September of 2008, starting a cascading effect on stocks and customer costs. In reality, where the COVID-19 crisis falls is nearly precisely the exact same place in the style cycle– simply one style season off.
The hit that luxury and fashion garments sellers took from the financial crisis was severe. However the impact from the pandemic appears particular to be more alarming. In the fall of 2008, most retailers took massive markdowns to clear merchandise, and while the sales and earnings hit was considerable, at least their physical stores were open, enabling consumers higher opportunity to buy the items and paying for lots of companies the chance to cover their overhead. While the e-commerce penetration of some crucial gamers is far greater today– over 30%at both Nordstrom.
It remains to be seen when the huge bulk of shops will re-open and under what sort of operating conditions. While some consumers might move back to their pre-pandemic habits quickly and unabashedly, it seems likely that many will go back to physical shop shopping reluctantly, either out of security issues or the realization that they merely can do just great with less stuff.
Either method, specific to fashion merchandise, it’s essential to remember that a fair amount of costs is driven by seasonal aspects. And for luxury merchants that derive a meaningful percentage of their sales from both domestic and global travelers, well, that isn’t coming back in the foreseeable future.
For consumers with the interest and the methods to take advantage of what will likely be once-in-a-generation bargains, it’s a big win. For fashion and high-end sellers and vendors, sadly, the losses will likely be historical and the prospective re-shaping of the market through shop closings, bankruptcies and combinations profound.