Let’s all make a coronavirus playbook for fashion.
We don’t know what’s going to happen with this rapidly developing situation, but we know everyone is being impacted. The more we can pull together and try to mitigate the damage to all levels of the industry, the better.
This is a process that begins with sharing what we know and kicking around ideas. And it requires the prerequisite of understanding that concessions and compromises will need to be made by all the invested parties. This is not a moment in time where we can pursue an everyone-for-themselves mind-set. Much greater harm will be done in the long run if such policies are blindly followed. If we all keep in mind that life will go on after this pandemic ends, we’ll find more productive solutions to the shorter-term issues.
Many if not most factories are experiencing slowdowns in production. Some are shutting down entirely. Global closures and restrictions will continue for some time. This affects the entire supply chain. The pace of deliveries has clearly changed. This means, of course, that retailers will be receiving a good percentage of their spring merchandise later than expected. Unfortunately, I’ve learned recently, during multiple conversations with the heads of our luxury retailers, that they frequently don’t know where their vendors manufacture and to what extent deliveries will be late.
First suggestion: Vendors need to be transparent with their buyers and inform them, as best as they can, as to when they realistically will be able to ship. Retailers need to cooperate with their vendors and extend cancel dates. Retailers also need to remove the threat of future markdowns from the air surrounding each of these difficult conversations. We know that sales, both retail and wholesale, will be impacted during the next few months. The burden and effects of this have to be shared reasonably and equitably.
If the mind-set becomes purely one-sided no one will benefit. The cycle of seasons is inevitably going to need to be adjusted. But as many have said for years now, consumers are tending to buy closer to the season in which they can actually utilize the products they’re buying, as opposed to three months or so beforehand.
The markdown cadence must be considered carefully. Retailers should determine if it’s in the industry’s interests as a whole, not just their own, to mark down merchandise so early after it’s going to be received. What would be so wrong with a full-price season extended for four or so weeks longer? Start the promotions when the season is ending, not barely beginning.
No one should take advantage of this crisis and try to dump merchandise on the consumer now in fear of having too much inventory at season’s end. Rather, this season in particular needs to be rethought. As I said, as the delivery cadence inevitably changes with the crisis, the sale/markdown cadence needs to change commensurately. Brands should be reassured that their retail partners are actually partners, and vice versa.
Online selling will most likely increase if consumers are concerned about going to large, crowded stores. Fortunately, there are few retailers today who don’t have e-commerce businesses. And there are few brands/wholesalers as well who haven’t developed a direct-to-consumer distribution component to their businesses. How the pricing online is managed by all will have a significant impact on the bottom line when this crisis eases. The same logic to the sales/markdown cadence has to apply to the brands online as it should to the multibrand retailers. Cooperation is essential if everyone is going to protect their bottom line.
We need to make the shopping experience an enjoyable one, particularly during these trying times. DTC sites need to ramp up and speak out to the consumer. Give them confidence. Bring them joy by selling to them. Let the consumer, who may be self-quarantined, have a pleasurable experience online! Talk to your customers. Don’t ignore the pressures everyone is feeling. Try instead to alleviate them for the moments they’re on your site. Acknowledge what we’re all going through. Be a calming hand.
Brick-and-mortar retailers have to work even harder to create safe havens for the consumer. Make it very obvious that you care about the health and welfare of your patrons. Show the consumer that you’re constantly thinking about them and their hygiene. Clean the doors to your stores and changing rooms after each entry. Reassure them that you’re doing your part to keep them as safe as you can. It’s better to acknowledge the crisis openly than to falsely pretend it’s not a major concern to most everyone. Acknowledge and at the same time calm them as best as you can.
For manufacturers, please make sure that you are vetting the stores you sell to properly. There is always a reason why some retailers have a history of paying you late, and it’s not usually one that will give you comfort.
These are stressful times. Cash flows will be squeezed even more than usual. If you do not have a factor or credit insurance, the burden is on you alone to manage this aspect of your business. It’s not a time to take inordinate credit risks for the sake of top-line sales. It’s a time to be more cautious instead. It’s better to have the inventory in your possession than to ship it and hope against odds that you’ll eventually get paid for it. Every retailer is going to be experiencing the effects of the crisis. Many have strong enough balance sheets to weather it. Many do not. You don’t want their potential weaknesses to impact your businesses more than necessary. Reach out to credit providers and your fellow brands. Information is golden. Aggregate the comments as best as you can and make intelligent decisions about the terms you provide to your retailers.
When it comes to your own accounts payable, if your cash flow is being squeezed by virtue of these extraordinary events, speak with your creditors. Don’t run away from the facts. Assure them that you will catch up in time, when your cash flow improves. Brands are dependent upon retail revenues, whether from their wholesalers or DTC customers. At this moment in time, we are not in the midst of an environment conducive to strong retail demand. Revenues will be smaller than anticipated and there will be less cash available to everyone. Communication surrounding brand/retailer specific, virus-precipitated constraints on cash flow is essential, and it goes a very long way in calming concerned creditors. Lack of communication is much more disturbing than honest statements.
During such uncertain moments in time, no one can expect that things will proceed as business as usual. All parties must cooperate, if the industry hopes to come out of this intact, then we must work with one another, not against. This means being understanding, communicative, open to extending terms when necessary, and generally having compassion for those suffering from this terrible situation. It doesn’t mean threatening and insisting upon payments and concessions that aren’t possible at this moment in time. It means accepting the inevitable and figuring out how to best cope with it. Yes, it will be painful for everyone. No one benefits here outside of the opportunity to generate trust and goodwill that will last far beyond the duration of this crisis.
We can deal with this calamity intelligently if we’re willing to discuss the impact openly. No one in the industry will come out of this unscathed. But if we work in unison and establish guidelines, respecting the multiple and varied concerns and dangers relative to each link in the chain that services the consumer, we can all work through this. We need to guard against thinking that unilateral solutions will be the most productive ones. This is a predicament that affects every aspect of business and society, and the only way to reach the light at the end of this tunnel is by treating each circumstance rationally and intelligently. We will reach that light. Everyone needs to believe that this, too, shall pass.
Gary Wassner is chief executive officer of fashion factoring company Hilldun Corp. and chairman of Interluxe Holdings.