Fashion brands want you to shop online. Should you?
While big businesses can weather a slowdown, most small businesses only have enough cash to survive two to three months, so supporting them is crucial right now.
“Depending on what happens [when Prime Minister Boris Johnson addresses the nation] at 8.30, our entire building will be shut down. We won’t be able to ship our e-commerce orders,” she said. A half-hour later, as Johnson confirmed London-wide lockdown, she opened the company’s safe and emptied the remaining necklaces, bracelets and rings into cardboard boxes to take to her flat, where she will resume fulfilling online orders later this week.
Mahtani, who employs a team of 13 and last month was awarded the Queen Elizabeth II Award for British Design from Princess Anne, has lately depended on her company’s website for half of her sales, and wholesale for the other half. But as the coronavirus infections have spread, a third of Alighieri’s deliveries have been cancelled, and orders for the upcoming Autumn/Winter 2020 season are only half of what had been forecast. That has made Alighieri’s website its primary source of income.
“Now is when 90-day payment terms really come back to bite you,” she said. “You’ve already been waiting 90 days for that stockist to pay you [for items already delivered], and now they say well actually we can’t pay you.” (Not every retailer has proven unsupportive: MatchesFashion has offered to settle invoices more quickly, and kept order levels consistent with previous seasons, Mahtani said.)
“Now is when 90-day payment terms really come back to bite you.” – Rosh Mahtani
Coronavirus-related lockdowns have been a boon to the top lines of online-everything stores such as Amazon, which is planning to hire 100,000 extra US staff to meet surging demand. But it has been a different story for sellers who do most, or all, of their business via bricks-and-mortar, or specialise in categories that are more susceptible to swings in consumer confidence, such as fashion accessories and perfume.
Sales in the US$1.4 trillion (S$2 trillion) fashion and luxury goods market are expected to plunge between 25 per cent to 35 per cent in 2020, compared with an increase of 4 per cent in 2019, according to Boston Consulting Group estimates shared with the Financial Times.
That would help explain the raft of promotions from fashion-focused retailers such as Net-a-Porter, Liberty London and Bergdorf Goodman, which are offering discounts of 15 per cent to 50 per cent on clothing and accessories that arrived in their warehouses weeks or even days ago. Such items would not normally go on sale until May or June.
For some founders and designers, the decision to keep selling online has presented a moral quandary. Patagonia’s US team and Paul Smith are among the brands who have stopped selling both in stores and online, citing employee safety.
“It can almost feel inappropriate to keep trading,” said Buffy Reid, co-founder of &Daughter, a London-based brand that manufactures all of its knitwear in the UK and Ireland. The company’s three-person team has been working from home since March 17, and continues to fulfil online orders through its third-party logistics partner, which she says is adhering to the government’s advice on stringent hygiene and reduced staffing numbers.
In Reid’s view, the consequences of halting operations would be worse for workers. “To me [continuing to operate] feels like a more responsible thing to do in that it protects our immediate staff, and protects our network of suppliers and makers, who are all independent family businesses.”
“To me [continuing to operate] feels like a more responsible thing to do in that it protects our immediate staff, and protects our network of suppliers and makers, who are all independent family businesses.” – Buffy Reid
Henrietta Rix, co-founder of four-year-old British contemporary label Rixo, is in a similar situation. “Our online site is our only source of revenue right now,” she says. The label has 140 stockists worldwide, some of whom are more than 70 days late on payments. “[The site] is keeping us afloat. It helps us pay our team [as well as our suppliers in India]. It is that important.”
Several designers and founders have made personal appeals via their websites and email newsletters to customers to support small business during this period. They are also promising to donate a portion of proceeds to charities working closely with coronavirus victims – a further incentive to conscious shoppers. Alighieri has pledged to donate 20 per cent of web sales to the Trussell Trust, a charity supporting UK food banks. Rixo is allocating 10 per cent of profits to Age UK, whose programmes are dedicated to helping older people.
“We need people to support us more than ever,” said Alighieri’s Mahtani.
“If everyone stops shopping, we have a profound economic problem. Supporting small businesses and prioritising them over the big brands is absolutely the right thing to do now.” – Jose Neves
By Lauren Indvik © 2020 The Financial Times