Fashion designers hit by coronavirus outbreak
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For fashion’s supply chain to come undone, sometimes all it takes is a missing zip.
Last week Amy Smilovic, founder and creative director of New York label Tibi, made it to Paris Fashion Week but problems are mounting and her March and April deliveries have been hit with delays.
“We had a whole shipment ready but there were no boxes to put clothing in,” said Ms Smilovic, whose company sources its fabric in northern Italy and manufactures much of its clothing in China, both heavily disrupted by the deadly coronavirus outbreak. “Material is not being made in northern Italy right now. Zippers are in short supply.”
“You can miss a whole shipment just because you don’t have a zipper — a stupid, 80 cent zipper,” she said. “We’ll probably be using a lot of buttons for fall. It will probably start a whole new trend.”
The $2.5tn global fashion industry is dominated by huge companies such as €200bn-LVMH but most designers are smaller businesses that supply department stores.
It is these independent designers that are facing a cash flow crisis as supply chain delays and reduced demand due to the coronavirus outbreak lead stores to cut or refuse orders. Some are now rethinking their supply chains and dependence on China
“It’s a true emergency,” said Carlo Capasa, president of the Italian Chamber of Fashion. He has called on the Italian government to establish a guarantee fund to help banks advance credit to businesses, to cut taxes and to allow temporary reductions in rental contracts. As it placed the country under quarantine, the Italian government has now pledged up to €25bn to help struggling businesses and families.
Young designers run out of cash
Around the world, less established designers, who rely almost entirely on wholesale partners for revenue, face an uncertain future.
Many retailers have contracts — particularly with young or independent designers whose collections are seen as riskier bets — that allow them to refuse payment if orders do not arrive within a 30-day period. Some may still accept the goods, but only on a consignment basis, or seek discounts.
This is creating a cash crisis for young designers, many of whom have just splashed out £80,000 or more on a fashion show, and must pay factories to produce both their pre-autumn ranges and the autumn/winter 2020 collections they have just shown at fashion week.
They also have payments due on the samples they are planning to show in June. Some factories, “afraid that the young talent has overspent on their fashion show” and that orders are down, are asking for higher deposits, to the tune of 50 per cent, according to Stefano Martinetto, chief executive of Tomorrow London, which provides advisory, investment, manufacturing and showrooming services to emerging designer brands.
“We are doing our best to deliver everything in time,” said Rok Hwang, whose four-year-old, LVMH Special Prize-winning label, Rokh, employs 10 people at his London studio. His spring shipments have been delayed by two to three weeks because of late arrivals of fabrics, plastic bags and boxes from Japan. “If anything happens, then it’s a serious issue,” he added. “As a small, independent brand, we don’t have huge amounts of capital.”
Industry brokers are asking retailers to honour payments for late deliveries. “This shouldn’t be an opportunity for retailers to start charging back to vendors for things they could not control,” said Gary Wassner, chief executive of New York-based Hilldun, which offers accounting services and credit to 400 fashion brands.
He and Mr Martinetto are calling on department stores to push back the spring markdown season to July 1 — a calendar correction they believe is long overdue. Over the past decade, markdown dates have crept forward so that spring merchandise is often discounted as early as May, when the weather is just starting to warm up.
They are also encouraging them to supplement delivery lapses with quick-turn capsule collections from designers who can manufacture in undisrupted regions, such as the US and parts of Europe.
“Certainly they don’t want to put people out of business. The only thing that is going to prevent that is working together,” Mr Wassner said.
More concerning for many in the industry is the impact the coronavirus spread is having on consumer confidence and travel — and how long that might last.
Chinese shoppers accounted for roughly 40 per cent of the €281bn spent on luxury goods globally last year, according to Jefferies, most of which were bought overseas.
“All of our department stores have felt the drop in footfall,” said Jamie Gill, chief executive of London luxury label Roksanda. “There’s been a pause for everyone. Even the Middle Eastern customers here in London — the Saudis, Qataris, Kuwaitis” are not out shopping, he said. “We’ve been sending stock to their homes.”
Mr Wassner anticipates a long-term overhaul of fashion supply chains, and said he was recently approached by private equity firms interested in reviving apparel manufacturing in the US.
“It’s a terrible situation that we have put ourselves in here,” he said. “We’ve been warning of our dependency on China for so long, sacrificing our ability to produce in the US for [a better] price point in China. Nobody listened.”
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