The Apparel Industry after COVID19

Recently I was asked to give projections on what the apparel industry would look like after COVID 19. 

Nobody can have a full projection as long as this crisis is still ongoing. If we are back in a few weeks that's one story and if we are back in a few months that's another. However, some of the existing trends could move faster than previously expected with potential implications for specific manufacturing countries. Some of these factors and their impacts are listed below: 

1. Diversification of sourcing destinations

Factor: A trend that had begun a decade ago, was first expedited with the trade wars between the US and China has lead brands and retailers to consider diversifying their sourcing destinations and to reduce their dependence on Chinese suppliers, not only for the finished product but also for the entire value chain (fiber, fabrics, trims, etc.). This trend is expected to increase exponentially as a result of COVID19. 

Impact for manufacturers (Egypt included): 

• Increased demand from EU and US buyers and retailers
• Opportunity to attract some of the Chinese manufacturers that will eventually be looking to relocate due to loss of business

2. Shortening of supply chains

Factor: Also a previous trend for faster lead times, shorter production times and smaller quantities, will gain additional traction as the expected contraction in demand from the imminent global slowdown due to COVID19, will prompt retailers to build smaller stocks and be more responsive to market changes. This will require manufacturing closer to the market and in smaller quantities: 

Impact for manufacturers (Egypt included):

• Increased demand from buyers (especially European)
• Opportunity to attract some of the relocating Chinese manufacturers
• Opportunity to grow supply of primary textiles (yarns and potential fabrics) to regional manufacturers

3. Increased demand for sustainability

Factor: several analysts are projecting a change in consumer behavior away from fast fashion to higher quality products. This was a pattern that was emerging slowly in previous years but some projections are seeing an increase in this trend due to the COVID19 creating more global awareness and changing consumer prioritization of their spending (less towards fashion and more towards savings and healthcare).

Impact for manufacturers (Egypt included):

• Smaller order quantities with higher diversity (need to build a local primary textile industry)
• Higher manufacturing content requiring better manufacturing skills
• Increased demand for sustainability practices
• R&D by factories and closer connectivity to retailers

4. Immediate slow down in demand

Factor: the current slow-down / recession caused by the lockdowns and loss of jobs, is going to impact the size of the demand from retailers immediately and for the short to medium term. 

Impact for manufacturers (Egypt included):

• Fewer orders
• Price competition 
• A number of manufacturers switching to local market
• A number of manufacturers going out of business

5. Change in retail models

Factor: Although a trend that has been growing over the past decade, brick and mortar retailers, especially Department Stores who still have the majority of their sales coming from physical stores, are seeing pressure increasing significantly due to the lockdown. Some of the major Department Stores in the US have filed or are considering filing for bankruptcy (Neiman Marcus, Macy's, JC Penny, etc..). 

Impact for manufacturers (Egypt included):

• Change in customer base requiring different marketing models to reach out to new customers
• Online retail growth requiring different supply models (shorter lead times and smaller quantities)
• Serving online retailers requires higher tech literacy from sampling to production tracking and communication

6. Switch to homewear and activewear

Factor: With the change towards working from home as well as expected social distancing to become part of - at least - the medium term life style, the need to "dress-up" is decreasing in favor of lounge and homewear. Moreover, a surge in physical and outdoor activities due to the lockdown is increasing the demand for activewear. There was an anecdotal piece of news from Walmart seeing an increase in sales of tops and a drop in sales of bottoms as people were doing Video Calls from home.

Impact for manufacturers (Egypt included):

• Change in raw materials from cotton based to manmade fibers and functional materials (disappearance of shirts, pants, etc.)

Other areas that could be affected but impact is not clear yet with contradicting projections are: 

1. Housing / real estate and therefore home textiles

2. Healthcare and whether this will mean a shift for institutional textiles (Hospital sheets - Gowns - Masks - etc.)

3. Tourism and whether there will be a reduction in travel leading to lower consumption of hospitality textiles 

4. Automotive industry and whether this will impact consumption of vehicles and therefore automotive textiles (combined with the rise in ride-sharing models, the need for less transportation due to WFH set-ups, etc.)

5. Work culture and whether there is going to be a reduction in office spaces and therefore commercial textiles (wall to wall carpeting, upholstery, etc.)

6. Shipping of goods due to localized production (there are lots of discussions regarding limiting globalization) and whether this is going to impact consumption of PackTech products and AgroTech products