How to Overcome Plummeting Sales and Inventory Disruptions From COVID-19

The fashion industry is facing its biggest crisis yet — the COVID-19 pandemic. Spanish fashion group Inditex announced the closure of over 3,800 stores across 39 markets. The group, which owns brands like Zara and Massimo Dutti, saw its sales drop 24 percent in early March. For Neiman Marcus, bankruptcy may be a possible outcome.

No company is left unharmed in this unprecedented situation, disrupting the day-to-day tasks of all roles across the retail industry. It's now more imperative than ever to take proactive measures to overcome retail slumps. Omnilytics’s report, Fashion Retail and the COVID-19 Crisis, delivers key action points to overcome the biggest challenges facing retail in light of the pandemic.

Strengthening and Securing Sales

With more regions in lockdown, global footfall will inevitably take a sharp plunge. Retail sales have already plummeted by 25 percent in Italy. In the U.K., sales were already stagnant even before the closure of non-essential shops. This disruption will cause further slumps. Scarce consumer demand will pose a higher threat for retailers that lean on offline sales. To combat this, retailers will need to swiftly migrate all offline stock to online and leverage digital purchases during this period.

With more retailers shifting their focus to e-commerce, competitor performance analysis must be carried out to gain granular visibility into market positioning. Retailers are also offering online deals to drive sales among housebound consumers. For example, Adidas is currently offering 30 percent off its new loungewear, sneakers and activewear at checkout.

To remain competitive, retailers need to vigorously monitor competitors’ marketing and promotional activities. Retailers should be monitoring the newsletters and websites of competitors to spot offers and tactical markdown opportunities. Layering that information with the retailer’s discount performance to understand current consumers’ spending behavior provides insight into the effectiveness of these tactics.

Managing Inventory Complications

The pandemic has also surfaced major supply chain disruptions for global retailers. Due to a slow recovery in production, overseas suppliers are unable to supply shipments in time. For retailers that already have shipments headed towards high-risk markets, immediate action must be taken. Due to the halt in luxury purchases in China, Gucci immediately re-routed its inventory for China to other markets. Gucci’s quick adaptability resulted in higher sellthrough rates when benchmarked against other luxury competitors.

Understocked retailers, on the other hand, will need to carefully phase product launch frequencies in line with competitor shifts to maintain newness. In light of reduced demand, many retailers are redistributing stock intended for slow-moving channels to better-performing ones, while the remaining inventory goes to e-commerce platforms or online marketplaces.

Different platforms will have varying consumer demographics, therefore, retailers must perform market-level analysis to gauge consumer demand. Brands should tailor the right assortment to the right channel, down to subcategories and colors. With that information in hand, retailers are restrategizing and curating assortment mixes to best meet the demands of each sales channel.

Conclusion

As the global economy continues to plummet, more retailers are at risk of permanent closures.

There is hope, however. Retailers that are equipped with the necessary tools and insights will be able to rise above the roadblocks. To minimize further damage, retailers will have to hasten their contingency plans with clear market visibility and proactive measures. The apparel market has changed, and retailers that can effectively position themselves with the market shift will be able to future-proof their businesses in times of crisis, and beyond.

Leong Kexin covered the fashion industry as an independent writer before joining Omnilytics. Now she reports on key retail events and educates the market on the critical role of data analytics in fashion.