Contrary to widespread popular belief Australia’s fashion and textile industry is much more than high-end designer fashion, encompassing a complex ecosystem of design, textile, manufacturing, retailing and education activities.
Unlike many other sectors, the fashion and textile industry is more vulnerable to uncertainties due to its inventory intensive nature, small product life cycles, volatile demand and long lead times, making it especially critical that the industry takes rapid action to safeguard its future and navigatechallenges of the post-coronavirus business landscape.
Fashion and textiles in Australia
The fashion and textiles industry in Australia is a noteworthy, and somewhat overlooked, contributor to the national economy. Indeed, in FY21 it contributed more than $27.2 billion to the national economy, representing about 1.5 per cent of total economic output.
Industry exports, meanwhile, were around $7.2billion in FY21, with the industry forming a high-value component of Australia’s trade portfolio. It employs over 489,000 people across its broad spectrum of functions, making it a bigger employer than both mining and utilities.
The COVID-19 challenge
COVID-19 undoubtedly had a direct impact on sales flowing from government-imposed lockdowns across Australia. However, the pandemic has also accelerated trends that were in motion before the crisis.
For instance, even prior to industry disruption caused by COVID-19, excessive inventories and all-year sales events meant only 60 per cent of goods were sold at full price. The pandemic worsened this situation, causing a large decrease of orders and a 90 per cent fall in average global profits.
So, it is little surprise that today urgent action is needed. The pandemic’s impact continues to reverberate across the industry, in many cases accelerating trends previously underway.
Most notably, offline retail — already under pressure at the start of the crisis — has experienced a steeper decline, while online retail has retreated as consumers save more, and experts warn that consumer spending will take some time to recover post-pandemic.
Forging the path ahead
Beyond the immediate priorities for the industry such as managing cash outflow, reviewing in-year inventories and assessing supply chains, there are several steps that may be taken to help nurture future growth and resilience.
Among these, industry players may consider moving to a demand-led model. This includes a bigger emphasis on pre-order and just-in-time production, onshoring and nearshoring, virtual sampling, and the implementation of micro-factories and rapid prototyping.
Part of this move also means a higher degree of automation, analytics and artificial intelligence (AI) as part of business models.
Here, American footwear manufacturer Wolverine Worldwide is a case in point, with its recent partnership with predictive analytics platform First Insight. The partnership means the shoe brand will be able to utilize AI to further leverage consumer data in its product decision making process, enabling their 12 brands to decrease lead-times, increase demand prediction accuracy and reduce markdowns.
Decreasing assortment complexity
Reducing assortment complexity is another possibility for industry participants. This means, in part, reducing complexity in collections and breaking traditional fashion calendars.
Here, American design house Coach is a standout, recently revealing plans to cut 50 per cent of its holiday season collection. Similarly, international fashion powerhouses Gucci and Yves Saint Laurent no longer present collections in pre-set seasonal schedules of the past.
The third plank of fostering industry resilience is addressing so-called “price-volume equation”. On this front, the industry should consider less discounting, such as removing end-of-season mark downs, while increasing use of market and consumer data assisted by analytics and AI. Brands must continually evaluate the effectiveness of promotional offers.
If fashion and textile companies take such forward-looking and bold action they will be able to position themselves to emerge from COVID-19 with a strong path to future success.