Fashion and luxury retailers must restrategise


September 27, 2020 | By RetailME Bureau

The fashion and luxury retailers must restrategise, recommends Boston Consulting Group (BCG), as both industries have felt the pinch of the COVID-19 pandemic acutely. As a result, they need to develop drastically different inventory and sales strategies to heal their businesses and emerge with a chance to thrive post-pandemic.

“That means adopting an agile strategy that we call the three-season management, in which current and future inventory is managed in a way that will boost stock monetisation and profitability across at least three retail seasons.”

According to BCG, the fashion and luxury retailers find themselves in their current difficult spot because almost all stores in this category were temporarily shuttered and many brands lack sufficiently robust or compelling online channels to reach and attract large numbers of shoppers to e-commerce. In addition, consumers have become increasingly budget-conscious.

Based on an analysis of numerous COVID-19 recovery scenarios, BCG estimates that fashion retail sales will be down as much as 35% in 2020 compared with last year. While luxury store owners will face sales deficits that could reach as high as 45%. Almost three-quarters of fashion and luxury companies could suffer from cash shortages.

As fashion and luxury retailers must restrategise. BCG explains, “The short-term responses to these challenges have been similar: most fashion and luxury companies we talked to are focused on cutting expenses by negotiating with landlords to postpone rent payments for five months or so, reducing the workforce, restructuring credit terms and applying for government support. In addition, among the few retailers that had well-functioning e-commerce channels, steep online discounting – 50% off on all products and free shipping – is a favoured option.”

“However, these steps are only band-aids to cover the immediate wounds; they will do little to ensure the long-term survival of the company. Which is why three-season management is so essential now.”

Read the report

 

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