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Fast Fashion in The Corona Crisis: What will it mean for garment workers around the world?

The impacts of coronavirus on fast fashion’s garment workers and how the fashion industry is facing this pandemic.


Guest writer Tallulah Hutson of High Variety Blog investigates the effect of the corona crisis on the fast fashion industry supply chains.  


In fast fashion, it used to be survival of the biggest, but the corona crisis has forced many high street giants to change the way they operate. With stores closing their doors, are sales still being made? As questions are raised regarding how poorly paid workers’ livelihoods will be maintained, this pandemic may expose further flaws in these large scale supply chains.

Which companies are handling the crisis in a humanitarian way? And can the fashion industry evolve positively, in response to the corona-related challenges it now must face?

What is the fashion industry facing?

As early as the 3 rd of March 2020, TIME Magazine flagged the impact of coronavirus on the fashion industry, calling it an early indicator of wider issues in our global economy. TIME cited reduced consumer demand in these uncertain times and fast fashion’s various cost-cutting cornerstones as reasons the garment industry could start to flounder.


The initial part of the problem was expected to be the number of companies that have become highly dependent on China for manufacturing. In 2018, almost 38% of global textile exports came out of China

 

Covid-19 and the effect on the global garment industry


Gary Wassner, co-CEO of fashion financing firm Hilldun Corporation and Chairman of InterLuxe, told TIME that the industry “allowed [this dependency] to happen because it was cost-efficient,” but went on to say that this factor “is not the only thing to consider.”


Most manufacturing in China did come to a sharp halt, as those now well-known lockdown procedures were put into place to curb COVID-19 infection rates. This may have served as a warning to the world about only working with manufacturing partners in one area. It did not, however, turn out to be the biggest issue sparked by the coronavirus that the fashion industry, and its many employees, would face.

Business of Fashion and McKinsey&Company compiled a report on what this pandemic may make of fashion. The industry’s “highly integrated supply chain” across nations is cited as one of the principal reason retailers “have been under immense strain”. But the report also points out how the “freeze on spending is aggravating the supply-side crisis.

 

Retailers struggle during covid-19 pandemic



The Chinese city of Wuhan, the original epicentre of the virus, reopened on April 8th when the most difficult days of the pandemic for Europe, North America and other regions still lay ahead. Lack of consumer demand in areas under newer lockdowns and inability to sell existing stock has quickly begun sending high street giants into further decline.

Brands are suffering from little to no foot-traffic, having closed many stores around the world as they try to keep up with various governments’ guidelines and laws. By mid-March, fast fashion brand Next had already experienced a 30% drop in sales. According to Next’s CEO Lord Simon Wolfson, even if a company is set up to sell online, the fact that “people do
not buy a new outfit to stay at home” remains. 


Wolfson also told Retail Gazette  that, when the coronavirus emerged in China, Next was among those companies that “first assumed the threat was to [their] supply chain.” But “it is now very clear that the risk to demand is by far the greatest challenge [to] face”. Wolfson went on to warn that we “need to prepare for a significant downturn in sales for the duration of the pandemic.” BoF and McKinsey’s report is in agreement. “Even online sales have declined 15 to 25 percent in China, 5 to 20 percent across Europe, and 30 to 40 percent in the United States”. 24



How are fashion houses handling such reduced sales?


Some are trying to tempt consumers with exactly that – heavily slashed prices and big red SALE signs online. But this may only help them shift that infamous seasonal stock which was already in stores.

In the field of fast fashion, it is typical for brands to place orders with suppliers and then wait until weeks or months after the garments have been received to pay the manufacturers. This means that suppliers usually foot the bills for necessary fabric and fibres upfront.

 

coronavirus hits the fashion industry leading to sales



Now, with trouble selling the stock they’ve already paid for and a murky outlook for 2020’s economy, large-scale brands have been cancelling expected orders in droves. According to The Guardian, retailers have been using the natural catastrophe clauses in existing contracts to do so.

In some cases, brands are also refusing to pay for the raw materials which their suppliers have already bought on their behalf. And suppliers are being hit further still, as certain retailers postpone deliveries of finished garments to prevent invoices being raised. 


These brands are effectively stopping their suppliers from getting paid for previous orders that have already been fully manufactured. Primark, Matalan, Mothercare, Marks&Spencer and Tesco are a sample of the household names that reportedly cancelled or delayed millions of US dollars’ worth of orders each. 

By March 23rd, retailers from Europe and the United States had cancelled around $1.5 billion worth of garment orders from Bangladesh alone. By April 2nd, orders cancelled from this one country amounted to $2.81 billion worth of products and work.


So what does this mean for workers around the world?


Humanitarian repercussions are expected to outlast the pandemic itself”, according to the report by Business of Fashion and McKinsey & Company. “For workers in low-cost sourcing and fashion-manufacturing hubs, such as Bangladesh, Cambodia, Ethiopia, Honduras, and India, extended periods of unemployment will mean hunger and disease”. 


Bangladesh is the second-largest exporter of garments in the world, with the industry generating 80% of the nation’s total export earnings. Dana Thomas, author of Fashionopolis: The Price of Fast Fashion and the Future of Clothes, says the impact of COVID-19 on the South Asian nation will be “profound”. 

 

How are we supporting the Garment industry during covid-19?



In an interview with GQ, Thomas explained that it is countries like Bangladesh, which have been meeting fast fashion’s vast volume demands, that are “getting clobbered” now. She argues that fashion’s supply chain is one “gigantic house of cards” that has started “violently collapsing”. 

According to Mark Anner, director of Pennsylvania State University Center for Global Workers Rights, it’s the brands that hold all the cards too. Anner told The New York Times that this pandemic “is showing us just how extreme that power imbalance".

But Managing Director of Denim Expert Mostafiz Uddin believes brands and retailers cannot actually “afford to let factories go bust.” He argues that Bangladesh is “strategically crucial for global apparel supply chains.”


According to Uddin, “there is already talk of a ‘bounce’ in sales when the crisis eventually subsides”, with consumers purchasing more in a smaller space of time than they normally would, once lockdowns are no longer. If this happens, Uddin believes “buyers will need their suppliers in Bangladesh more than ever.” 

Dana Thomas, however, argues that when brands do decide to place new orders, garment workers will be “desperate”, due to existing poverty that will likely worsen as factories close and work is cancelled or postponed. “They’ll come running back and they’ll probably be paid less.”

The humanitarian risk this poses is clear, particularly in light of the fact that many garment workers were being paid less than 50% of Bangladesh’s living wage before the coronavirus squashed retail demand.  As Uddin poignantly notes, “poverty is a killer, too”, and many of the 4 million garment workers in Bangladesh “have families to feed.” 

 

the effect of covid-19 on bangladesh garment industry


The Bangladesh Garment Manufacturers and Exporters Association reported that nearly 2 million workers had already been directly affected by cancelled orders by March 27th. Meanwhile, many fashion retailers continued to cancel and delay orders. Uddin remains resolute, however, that it is not just in Bangladesh’s interests but the entire industry’s, “right through the supply chain, to work together, find solutions and support each other”.

Garment manufacturer representatives from Cambodia, Vietnam, Pakistan, China, Myanmar and Bangladesh have joined forces to call on brands to do exactly that. They stated that, “during this unprecedented time of […] COVID-19, responsible business has become more important than ever for the world to survive and recover from this crisis”.

The combined group have asked brands and retailers to meet criteria as they navigate the changing landscape of this global pandemic. These criteria include a call for retailers to “carefully consider all potential impacts on workers”, throughout decision-making processes. It’s a call that came a few short days after British brand New Look delayed payments to its suppliers indefinitely, in a move one manufacturing company called “totally out of order”. The supplier argues the brand is “passing all the risk onto the supply chain", in an already
high-risk time. It’s likely many others feel the same.


Are garment suppliers and workers being given any support?


Some brands have begun pledging to treat their suppliers differently. UK fast fashion brand Primark was one of the first companies to be criticised for cancelling orders at the end of March. But the company has since set up a fund to cover the wages of garment workers involved in the production of all cancelled “future orders”. These are orders that were already in production but would not have been shipped to Primark until the end of April. 

This fund may offer some relief to particular suppliers’ employees but it only guarantees their income in the short term. For countries like Bangladesh, that rely so heavily on the fashion industry, there has to be concern for the long-term too.

In late March, Prime Minister of Bangladesh Sheikh Hasina announced a government support package for the country’s export-oriented manufacturers. The package is worth just over $600 million and is designed to help pay these companies’ many workers. 

This action has been called a “very good gesture” that has not gone unappreciated by Bangladeshi manufacturing companies. The managing director of garment exporter Snowtex Group, however, told The New York Times that this amount is still “very tiny, very small” compared to the lost custom and cancelled orders the sector is enduring.

The president of The Bangladesh Garment Manufacturers and Exporters Association urged companies that had not already cancelled their orders to continue to pay for and accept them. This end of March message was aimed at several brands, in particular, including Swedish retailer H&M.

 

H&M put under pressure to help support their supply chain



H&M has since become the favourite son of fast fashion in a crisis, having confirmed that it would pay for all its orders placed prior to the coronavirus, whether complete or partway through production. The retailer also stated it would not attempt to haggle down previously agreed prices.

H&M went on to say that they were “intensively investigating how [to] support countries, societies and individuals from a health and financial perspective” at this time. The brand called the global pandemic and its impacts fashion’s greatest challenge, and promised to “focus [their] efforts on countries that are highly dependent on the textiles industry”. So far, H&M seems to be acting on its word.

The retailer rapidly announced they would be utilising their supply chain to make personal protective equipment for health services and areas in need around the world. This should lock-in some work for suppliers’ employees, as well as help, contain the spread of the disease at the core of the crisis.

From belo supporting their team during covid-19

As From Belo, an ethically sustainable brand ourselves, we have also made sure to support our team and those in our supply chain. Our Co-Founder Maria writes from Belo Horizonte, Brazil, her home town and the brand’s base, about how we are ensuring our team stay safe and still receive their income while work cannot go ahead.

Whilst Maria has many concerns for the millions living below the poverty line in Brazil at this time, she has also found that there are “amazing, kind people out there doing their best to take care of the ones in need”. You can read more about the efforts in Brazil, here.

So what’s in it for the big brands?


While fast fashion is an increasingly criticised sector of the garment industry, some members of the sector are clearly addressing the pandemic in more conscientious ways than others. Solutions for Retail Brands (S4RB), a supplier engagement specialist firm, has highlighted the damage companies themselves may incur by not taking their suppliers concerns into consideration.


S4RB expects that companies that have come under criticism from their suppliers, such as New Look, will not be easily able to repair their relationships. Many suppliers may be completely unwilling to work with these retailers while others will likely charge higher initial fees to include more risk factors.

In statements that echo Mostafiz Uddin’s arguments, the director of S4RB David Taylor has said that, “without established and engaged suppliers, [a retailer’s] recovery will be even more challenging if not impossible” when this chapter hopefully comes to a close.

There is another element that could also be at play. Consider that it was after the
international and media outcry over cancelled orders that Primark announced their decision to fund garment workers’ wages. It was after a leading Bangladeshi manufacturing representative directed his pleas to H&M that we began to see this brand’s action plans and promises splashed across our news pages.
Is it possible that these retailers are starting to see a conscientious company outlook as a truly valuable commodity? Is looking good something brands want to invest further in? If so, what will this mean for the future of fast fashion – a typically infamous and often environmentally unfriendly sector?


Will the fashion industry undergo reconstructive surgery?


If this crisis forces fashion to redesign itself, its new look will depend on whether financial or ethical interests win out. Unless, of course, we see ethical interests finally become what is most financially favourable.

Taylor, of Solutions for Retail Brands, claims that “fast fashion will need to innovate to reverse the trend of consumers opting for more sustainable options”. But “revers[ing] the trend” of sustainable shopping sounds slightly concerning in itself. Surely incentivising fashion brands to evolve into more sustainable systems would be, to put it simply, more sustainable.

According to Business of Fashion and McKinsey&Company’s collaborative report, “the coronavirus presents fashion with a chance to reset and completely reshape the industry’s value chain”. It also argues that fashion is being presented with an opportunity to reassess the values by which it measures actions. 

That being said, the report found that fashion would emerge from this crisis into a
recessionary market. The current “quarantine of consumption” could cause companies to prioritise “digital acceleration [and] discounting” in particular, as “the immediate crisis subsides”. It’s possible that focus on this could push sustainable and ethical innovation down a brand’s to-do list.

But the report also expressed expectations that the pandemic will cause the shifts in the industry that were already occurring to “gain speed and urgency”. According to BoF and McKinsey, these shifts include “growing antipathy toward waste-producing business models and heightened expectations for […] sustainable action” in consumers.

So we may see both these trends gain traction in the months ahead. Overall, in the aftermath of COVID-19, there could be an increase in consumer demand for sustainable and ethical fashion.


BoF and McKinsey do point out, however, that the global pandemic could cause a “Darwinian shakeout” of all fashion retail companies as well. “The crisis will shake out the weak, embolden the strong, and accelerate the decline of companies that were already struggling before the pandemic”. This could mean we see the industry’s sustainability movement and Fashion Revolution overridden by an evolution, in the fundamental and unforgiving sense.


So the next question is, will big businesses or small, sustainable brands survive?


This “Darwinian Shakeout” might not be all bad for the typically smaller ethical and sustainable brands. (As long as some of them are not among those companies “already struggling” ahead of the corona crisis.)

 

The future of the highstreet - is it more empty than when covid-19 began?


Most large scale fast-fashion retailers own or rent many physical outlets; their business models include in-store sales, many of which cannot currently take place. For years, store sales have been steadily declining in the face of online shopping’s efficiency. This decline is one of the trends the current pandemic could permanently exacerbate.

Many smaller businesses already make all of their sales through online platforms. They may have an advantage and be able to compete better in the early stages of a significant shift towards online shopping. At the very least, they won’t incur losses from store closures.


Most retail businesses are, however, likely to experience some production line and supply chain disruptions due to coronavirus, whether they employ ethical labour practices or not. It is the nature of a globalised world, in the grips of a global pandemic. The International Textile Manufacturers Federation has already predicted that the garment industry’s turnovers will be an average 28% lower than in 2019, the world over. 

 

The future of retail? Is it online?


We can expect that, as we enter the forecasted recessionary market, most of us will have less money to spend on fashion retail and will be shopping less often. This could have several impacts on what we look for when we do shop.

Kate Hills, founder of Make it British, told Just-Style that she expects the current lull in non-essential shopping will cause a lot of consumers to question the way they shop. She wonders whether people will decide they can live with less.

Investing in fewer items of greater quality and durability may become a more common consumer choice. We might put more thought into each purchase ahead of it as well; buying a new item of clothing could become more of an event than an impulse.


If so, brands will have to work a lot harder to convince us that they are exactly who we should be handing our precious pennies over to. As a result, they may look for more ways to set themselves aside from their competitors.


This is where sustainable and ethical action in business could become more commonplace. If consumers are visibly eager to support companies with sustainable outlooks and ethical practices, brands may adjust their business models accordingly. The keyword, however, is visibly. Brands will only prioritise what they believe their existing and target consumers are interested in, and willing to pay for in their purchases.


The not-for-profit global movement Fashion Revolution is already utilising this theory to address the cancelled order crisis garment suppliers are currently facing. The group is encouraging consumers to contact their favourite brands and question how the people in their supply chains are being protected from the range of risks coronavirus poses to them. Fashion Revolution even constructed a template letter for consumers to use. 


A final look to the future


We are seeing certain big brands take more accountability for their supply chains. As consumers, we seem to be taking a deeper look into our wardrobes than we have for a while as well. But the more news we are getting about the systems our clothes come from, the more questions there are to ask.

As in most crises, the most unprotected and underpaid remain the most at risk. Both from a health and a financial perspective, as well as their very real intermix. It is clear that retail’s pre-existing business models are not really coping. So is there hope for the industry yet?

 

Fashion Revolution - our future is on the line.


According to the range of reports and articles already in print, a significant number of fashion retail companies are expected to fold. But another consensus is also arising. Collaboration and transparency along supply chains, between brands and even competitors could be their best bet. There’s hope this will help the whole industry innovate. And innovation is expected to be necessary if companies are to survive whatever lies ahead.


The big questions, however, remain. Out of this tragedy, can we create more resilient systems, both globally and locally? If the “gigantic house of cards” is really collapsing, what will we build in its place? Lastly, as the world innovates, what will we strive to change?


with love

Tallulah


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