It has been a nightmare week for the world of fashion retail. The situation we are waking up to each morning was almost unimaginable less than a fortnight ago.
Swathes of retailers have closed stores – with no real idea of when they will reopen – in a bid to halt the spread of infection. The nation’s appetite for buying fashion has been eviscerated in a matter of days. Extremely difficult decisions are already having to be made.
As ever, when the going gets tough in fashion, it is suppliers who bear the brunt. Orders are being cancelled, discounts demanded, and payment terms extended. Manufacturers have told Drapers they fear bankruptcy following a rash of cancellations across the supply chain as retailers battle evaporating footfall.
Primark has written to all suppliers asking them to halt all future production and purchasing any materials for the retailer. New Look has put a halt on all current and future production. Several high street chains – including Monsoon Accessorize, Debenhams and value retailer M&Co – have extended their payment terms to help manage cashflow.
The fallout for some suppliers has been swift. Distressed manufacturers have written to Drapers warning of spiralling losses, redundancies and potential administration. Naturally, they are increasingly angry and anxious about the future.
Primark boss Paul Marchant acknowledged the effect Primark’s decision will likely have on its network of global suppliers.
“This is profoundly upsetting for me personally and for all of the team at Primark. We have worked alongside so many of our suppliers for many years, and value our relationships enormously,” he said in a statement. “We recognise and are deeply saddened that this will clearly have an effect throughout our entire supply chain.”
The Primark CEO was also clear that the retailer had “no other option than to take this action”. All of its 189 UK stores are now closed. Primark has no transactional website. If it did not cancel orders, the retailer would be left with stock it simply cannot sell.
Things could be about to get even worse for suppliers as even retailers with transactional websites shut them due to concerns about warehouse staff safety. Next and Moss Bros have both suspended online operations to protect workers.
Other retailers have also stressed that cancelling orders or changing payment terms is a matter of survival. Debenhams CEO Stefaan Vansteenkiste told suppliers extending payment terms by 30 days was “crucial to make sure we can ultimately pay the outstanding payable balances we have with you”.
These challenges are at the crux of the heartbreaking decisions currently facing fashion businesses.
This is a two-way relationship where one hand washes the other. Suppliers need retailers, and retailers need suppliers. When the spread of infection is under control, social restrictions are lifted and business can return to something like normal, retailers will need there to be suppliers left to pick up production.
But with stores closed and demand down amid a crisis that could last months, retailers are having to cut costs wherever they can to stay afloat and protect jobs.
Suppliers will also have to fight for their own survival through unpleasant means, such as job losses and cutting costs. More positively, some factories are now switching production to manufacture medical supplies, including hospital gowns and face masks, to weather the storms ahead.
The truth is, there are no easy answers.