The scenario analysed by the Expo Riva Schuh & Gardabags Observatory confirms recovery starting from 2022 with an analysis that studies the critical issues, distribution channels and purchasing behaviours that may help post-Covid organisation.
Riva del Garda, 6th April 2021. The effects of Covid-19 on the global economy and, in particular, on the fashion and footwear industry, and the strategies required to restart in the post-pandemic period were at the core of the ‘The post-Covid globalisation process’ live talk organised by Expo Riva Schuh & Gardabags, led by Enrico Cietta, Fashion Economist & CEO of Diomedea joined by Joao Maia, General Manager of APICCAPS and Elisabetta Mantese, Manager of Euler Hermes Italy.
The meeting started from an obvious premise: if in the past, crises have impacted more on certain economic variables and then spread to the entire global economy, in the case of Covid-19, the crisis has impacted directly on the globalisation process, with destabilizing effects on economies worldwide, but not equally in all the countries involved.
An asymmetry of effects was highlighted by a study conducted by APICCAPS with experts in the footwear and fashion industry from all over the world in which it is evident that all economies have been hit but in different ways: whereas China already shows signs of growth, both Europe and the US have negative indicators in one case and fluctuating in the other. Furthermore, on a global level, the pandemic initially impacted more strongly on retailers than manufacturers due to the forced closures of shops, but already by autumn of 2020, retailers showed signs of recovery higher than the manufacturing companies. And how about prices? Initially reduced using the most varied strategies, we now expect a recovery in the increase in product prices, especially in North America, with a driving effect on the rest of the global market.
But the most evident criticality is linked to the cash flow crisis on the part of companies (about 24% and which involved France and Spain in particular in the first phase of lockdown), and insolvencies by creditors and insurance systems of credit that have put them in severe difficulty, especially in Europe. If it true that we don’t expect to see a recovery of the economy before 2022, the reaction of the production and distribution system will depend above all on the speed of diffusion of vaccines and on the compensatory measures implemented by the various governments, with forms of direct contributions and deferrals in the collection of taxes, and prospects of a return to a pre-Covid economy not before 2023.
It is the fashion sector that has suffered the most, with a drop in turnover of over 50%, and which witnessed the weakest recovery in the rest of the post lockdown period with losses still amounting to -20%. It’s a different matter for large chains and department stores of clothing and footwear, as well as luxury products and sportswear, which have shown greater resilience. In any case, the pandemic has had a strong psychological impact on the consumer, whose behaviour has changed profoundly, especially regarding the fashion sector, so much so that it is believed possible that about 6% of fashion companies risk disappearing by 2021.
The pandemic has also had varying effects on distribution channels: the online sector, which has gained from the various lockdowns and partial closures, has seen general online stores, such as Amazon and ebay grow, followed by multi-brand footwear and fashion stores, such as Zalando or Farfetch, ending up with their own brand retail stores, while physical stores have suffered the biggest losses. Among these, the large scale stores have been able to react better to the post-pandemic crisis, while the footwear multi-brand business and, above all, the single-brand stores, saw a marked decline in the business (-30%). This does not mean, however, that physical stores are destined to disappear entirely because they will remain a valid alternative to online purchases if they are able to convey a strong brand image and, at the same time, offer the consumer an effective 'shopping experience', in an increasingly integrated merger of all sales channels. It will be the digital relationship that the brand establishes with the consumer that will make the difference.
As far as the footwear market is concerned, the APICCAPS study shows that the factors that guided consumption in 2020, in addition to price, were not so much trends as sustainability, which will increasingly be at the centre of consumer choices in the future. Interestingly, consumers state that they are prepared to pay around 4% more for footwear made from recycled materials, as well as for domestic products, while they appear willing to pay up to 8% more for longer product life and 9% more for a customised shoe. On the other hand, online shopping and home delivery justify only a 3% higher price.
In general, formal and elegant footwear, as well as those for special occasions and ceremonies, paid the highest price for the consequences of the crisis, while casual, outdoor and sports footwear showed greater resilience. If recovery is expected from 2021, the process will be very slow. “In the near future - said Joao Maia - there will be companies capable of growing a lot. Dominating the scene will be mainly those operating in the casual and sports sector, with a strong brand image and an effective online presence, who will have all the necessary space to expand into the Chinese market, which is currently growing rapidly. These are the key factors. It is no longer a question of price: you can lose turnover even if you have a cheap product and, on the contrary, see an increase in sales in the luxury sector.”