A moment of relaxation for many French people, shopping is an activity that many French people are particularly fond of. Nevertheless, the ready-to-wear sector, once flourishing, is now going through a period of unprecedented crisis. Enter here rise of online salesTHE changes in consumer purchasing behavior and the impacts of the COVID-19 pandemic, this industry faces many challenges. This article discusses the reasons for this crisis, its effects on fashion companies and the strategies adopted to try to remedy the situation.
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The reasons for the crisis
Nowadays, consumers are changing their purchasing habits significantly. Here are some facts that we have observed to illustrate this trend:
– Increase in online sales: According to a study by Fevad (Federation of e-commerce and distance selling), online sales of clothing increased by 30% in 2020. This increase continues, with growth of 15% in 2022. Given the habits adopted by consumers, this increase will surely continue in 2024.
– Preference for sustainability: Environmental issues are becoming more and more part of people’s daily lives. In fact, consumers are then more sensitive to the environmental impact of their purchases. A 2021 McKinsey survey reveals that 67% of consumers consider sustainability a key factor in their purchasing decisions.
– Reduction in consumption: The pandemic has prompted many consumers to cut back on non-essential spending, including clothing. INSEE reports a 20% drop in clothing spending in 2020 compared to 2019.
Closure of physical stores
The pandemic has led to temporary and permanent closures of many ready-to-wear stores:
– Reduction in attendance: Even after stores reopened, footfall remains below pre-pandemic levels. According to Procos (Federation of Specialized Trade), footfall in clothing stores decreased by 25% in 2021 compared to 2019. This decline is largely caused by the increase in online sales and orders on sites such as Shein or Boohoo.
– Bankruptcies and restructurings: Many brands have filed for bankruptcy or had to restructure to survive. For example, Camaïeu, a large French chain, was placed in receivership in 2020. Subsequently, this brand was forced to close all its stores in France. Other well-known brands like Pimkie and Yves Rocher abroad are also experiencing difficulties.
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The problem of overproduction and unsold goods
The mass production model, which has long dominated the sector, is showing its limits:
– Unsold stocks: According to one study from the French fashion institute (IFM), around 30% of clothing produced each year is never sold.
– Financial impact : These unsold items represent a considerable financial loss for companies. In 2020, the cost of unsold goods for European retailers was estimated at €50 billion by McKinsey.
– A possible solution: The only solution for the moment in order to compensate for these losses linked to overproduction and unsold goods is based on outlets. Indeed, some places clear unsold items at lower prices so that losses are lower for the brand but also so that this operation can benefit consumers looking for good deals.
The effects of the crisis on businesses
- Layoffs and staff reductions
The crisis has led to numerous layoffs in the ready-to-wear sector:
– The example of H&M: In 2020, H&M announced the closure of 250 stores worldwide, leading to thousands of job cuts.
– Discounts at Zara: Inditex, Zara’s parent company, has also reduced its store network, closing 1,200 points of sale in 2020.
Despite the crisis, some companies are managing to adapt and innovate:
– Accelerated digitalization: Online sales have become a crucial channel. For example, Zara’s share of online sales increased from 14% in 2019 to 32% in 2021, according to Inditex.
– Sustainable initiatives: Many brands are investing in sustainable initiatives. For example, H&M has committed to using only recycled or sustainable materials by 2030.
- Recovery strategies put in place
Companies are looking to diversify their sales channels to reach a wider audience:
– Marketplace and third-party platforms: Some brands choose to sell their products on marketplaces like Amazon Or Zalando. A study by Coresight Research shows that 40% of European consumers prefer to buy clothes on marketplaces rather than on individual brand sites.
– Omnichannel experiences: Retailers are investing in omnichannel experiences, in other words across multiple channels, to improve the consumer experience, to integrate online and in-store sales. For example, the concepts of click-and-collect and showrooming are gaining popularity.
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A need to strengthen customer relationships
Fashion companies are increasingly placing emphasis on customer loyalty and engagement:
– Loyalty programs : Many brands are developing attractive loyalty programs to encourage repeat purchases. According to a PwC study, loyal customers represent on average 20% of customers but generate 80% of sales.
– Personalization of the experience: Personalization of offers and shopping experiences has become a priority. For example, brands like Nike offer online product customization optionsthereby increasing customer engagement and satisfaction.
The crisis in the ready-to-wear sector is a major challenge, but it also pushes companies to innovate and adapt. By diversifying sales channels, strengthening relationship customer and by adopting practice sustainablethe sector can hope to recover and prosper in a constantly changing environment.
