COVID-19 unravels clothing supply chains: GlobalData

March 29, 2020 | By RetailME Bureau

Clothing supply chains are unravelling fast, as the fallout from COVID-19 outbreak hits retailers and manufacturers across the world, stated data analytics and consulting company GlobalData.

From initial concerns over the disruption to deliveries of clothing from China, where the outbreak began, the pandemic is now causing chaos throughout the entire supply chain.

Quarantined workers, travel restrictions and disruptions to the supply of raw materials such as yarns, fabrics, trims, packaging and labels – much of which come from China – are hurting manufacturers around the globe.

At the same time, retailers in North America and Europe are axing, slashing or postponing orders, as well as deferring payments, as country lockdowns reduce shopper footfall and stores are closed to try to slow the spread of the virus.

UK-based clothing retailers Primark and Marks & Spencer are struggling with unsold inventory and have in the last few days shaken the sector with massive order cuts and cancellations. In fact, Primark that doesn’t have an online ordering platform decided to close its stores in the UK. Meanwhile, fashion retailer decided to shut its online operations on March 26.

“Next’s decision is likely to reverberate across the retail industry – and many warehouse workers at other retailers will question why they have not been furloughed to protect their safety. River Island, TK Maxx and other smaller players have also shut online operations, and as demand for fashion continues to fall. We expect other retailers to follow suit, unless they can find a way to operate warehouses safely. Currently Marks & Spencer believes it can do this, but it and other retailers of non-essential goods will be under pressure from concerned staff,” observed Patrick O’Brien, UK retail research director, GlobalData. “While demand for clothing and footwear will obviously be impaired by an isolating population, retailers were hoping that online could partly offset the absence of store sales for the three-week minimum period that non-essential stores have to be shut for.”

Some, such as H&M Group and Inditex, are rising to the challenge by refocusing their supply networks and sourcing expertise on the production of much-needed medical face masks and other personal protective equipment (PPE) for hospitals and health care workers.

“While many clothing brands and retailers are focusing on their own survival in these difficult times, they must also heed the financial strain on the factories and workers who produce their clothes. Collaboration, cooperation and strategic partnerships have been rallying calls across the industry in recent years, and they’re needed now more than ever before,” said Leonie Barrie, apparel analyst, GlobalData

“The situation is unprecedented, and may well worsen before it starts to improve. Liquidity and cash flow are major problems in the clothing supply chain right now. Yet, there is the prospect of even more severe disruption and millions more job losses if factories don’t have the funds to survive until the end of the crisis,” Barrie added. “We’re in uncharted territory right now, so there’s no established set of best practices for brands to follow. So, while navigating their own challenges, they must continue to uphold responsible purchasing practices across their supply chains.”