Knitting the threads of fashion digitally
Indeed, the initial phase of Covid-19 was a loss for airlines and the stakeholders due to the shutdown of cloth manufacturing economies like Sri Lanka and Bangladesh and fashion shows being organised virtually. Now, the pandemic is accelerating landscape shifts and consumer behaviour in ways that play to the strength of the apparel industry. Thus, customers have become more responsive, making up for the lost time and heading for the digital checkout.
Amazon Lab126 which has developed products like Fire TV, Kindle Fire, and Echo has also put together a virtual try-on system, called Outfit-VITON. Here, the user can select garments within the reference images to receive an algorithm-generated outfit output showing a realistic image of the queried person being dressed in the selected garments.
The pandemic is accelerating landscape shifts and consumer behaviour in ways that play to the strength of the apparel industry. Thus, customers have become more responsive, making up for the lost time and heading for the digital checkout.
Indeed, the initial phase of Covid-19 was a loss for airlines and the stakeholders due to the shutdown of cloth manufacturing economies like Sri Lanka and Bangladesh and fashion shows being organised virtually. Speaking on the impact of the pandemic and customers opting for digital channels, Lisa Oxentine, managing director, global sales for American Airlines Cargo, notes, “At the outset of the pandemic, there was a temporary backlog in the market for transporting existing fashion stock levels to their destination. Following, we saw many retail outlets closing physical stores as various regions entered lockdown. This caused a gradual shift to online shopping habits.”
In line with its motto ‘Raise the Bar’, Turkish Cargo is continuously digitalising its business processes by introducing CARGY, the new artificial intelligence robot and by integrating virtual workforce robotic process automation - Alpha, Bravo, Charlie, and Delta. Halit Tuncer, cargo director South Asia, Turkish Airlines, comments, “Although, we were ready to resume operations at the first stage of the pandemic we were forced to stop completely especially in Bangladesh during April due to shutdown of the factories. But I am happy to say that recovery was very fast thanks to the adaptation of factories to produce PPE and facemasks. TK was one of the first airlines to resume operation and we are closing 2020 with a higher market share. For Sri Lanka, the major commodity is garments but we did not stop moving cargo and started pax-freighter operation with cabin loading in April. That helped us keep the momentum and increase our market share.”
According to the McKinsey Global Fashion Index, the apparel industry’s profit
is estimated to fall by 93 percent in 2020
Kenya Airways which was projected to go into a nationalisation by the end of 2020 made African skies proud by flying Covid-related supplies, perishables, flowers, and pharma, at a time when most of the African carriers are facing the heat of bankruptcy. Peter Musola, cargo commercial manager of Kenya Airways, says, "Certainly KQ faced serious impact especially as our key buyer US was under lockdown. Moreover, with the suspension of US flights, this even made it more difficult." The airline has restored operations to New York from November 30.
Lufthansa Cargo transports fashion shipments mainly to the US, Mexico, Japan, and Korea. Katharina Stegmann, senior manager communications and spokesperson, says, “Due to the growing e-commerce demand, consumers nowadays want their ordered clothes as soon as possible. Therefore, the fashion industry is demanding quick transport. Currently, we do not see any major development in regards to transport for fashion goods although their preferred transport mode – belly capacity on direct flights has been reduced.”
There is a shift from offline to online channels driven by lockdowns and restrictions. The extent of this shift is not yet known – and therefore the balance between the different channels. Will offline purchasing come back to old levels? Will online continue to have the market share it has recently achieved? Where this trend in consumer behaviour settles will decide the eventual winners and losers from the pandemic era and where trade finance is safe to provide. Retailers who get that balance wrong will have more stress than the established players.
Tim Nicolle, founder and CEO, PrimaDollar, which connects importers and exporters directly with the working capital that they need, comments, “The garment industry, including retailers, has been strongly affected by the pandemic. We have seen suppliers hit in three ways: cancelled orders, closed factories, and new orders are coming into the market but on open account with long-deferred payment periods. This reflects the financial pressures that buyers (especially retailers) are experiencing. Moreover, there will be a wave of defaults and insolvencies on the buyer side, and this will have systemic consequences across the whole supply chain. We are nervous about the first half of 2021. In this period, the government supports will expire, and we will see which buyers have been mortally wounded by the costs of the pandemic, and which are still viable. So we do not know the answers yet. This means that banks and trade finance providers will move forward into 2021 with great care.”
According to the McKinsey Global Fashion Index, the industry’s profit is estimated to fall by 93 percent in 2020. However, many fashion companies have taken time during the crisis to reshape their business models, streamline their operations, and sharpen their customer propositions.
Meanwhile, trade finance is available to support supply chains that have good buyers and omnichannel has become more important. To make quick finance available to its clients, PrimaDollar has developed a new online trade finance service called ‘Supply Chain Trade Finance’. “This allows larger importers to take control over how their international suppliers are funded and paid and this will increase the agility of their supply chains, reduce landed costs, and significantly help exporters with pre-shipment finance. This is a major development for the garment industry supply chain and will become very relevant as we all move into recovery phases next year,” Nicolle mentions.
Supply chain trade finance will make a huge difference to the large buyers as they start to gain control over the financial dimension of their international supply chains. It will make pre-shipment financing cheaper and will enable a coordinated financing model to be applied across all suppliers under the control of the buyer. In the end, this will help to stabilise supply chains as they adjust back to the new normality that will emerge.
There is a lot of uncertainty as to how markets will behave as normality starts to return.
Oxentine says, “2021 depends on consumer demand. We are encouraged by what we see and hear from our partners and believe the forecast to be positive. We are prepared to support our customers and their freight needs as demands for fashion textiles may change.”
As a European carrier, Turkish Airlines' focus on apparel transportation is on the trade lane between South Asia to Europe and the US. Tuncer states, “We keep our expectations high for 2021 and we have added one extra scheduled freighter for both Bangladesh and Sri Lanka.”
During the Q2 and Q3, the most vibrant origin for KQ was Mauritius (MRU). “Currently, we see a major resurgence for the ex-Kenya movements and expect these to play a critical role for 2021. We will be flying a hybrid of both freighter and passenger aircraft on Mauritius – New York route. We are operating the B733F to MRU and the incoming loads connect onto our JFK flight. Our MRU freighter service has been running throughout 2020,” Musola notes.
The freight rates rose fastest since April and May before stabilising in September. Recollecting the freight rates in the initial phase of pandemic, Oxentine says, “During this time, market rates for freight climbed and made it less viable for cargo-only flights to carry textiles including fashion. As the economy adjusted to the pandemic, and in addition to seasonal changes, our sales team saw the peak in demand for fashion textiles which resulted in more demand for air freight and willingness to pay the market price for capacity.”
Along the similar lines, Tuncer says, “If you consider hundreds of aircraft were and still are on the ground there is no way to cover the cost and be profitable. Especially for passenger freighters, you can load half the amount of cargo with a higher operation cost. Due to high freight rates pax-freighter operation was viable in Q2, currently, we reduced pax-freighters due to declining rates and resumption of passenger operation in Sri Lanka.”
As fashion was not a much-demanded commodity like the Covid-19 supplies, shippers airfreighted only the most urgent products. Musola comments, “With the quadrupled freight rates, we were able to make margins off these movements however, the volumes were not at all anyway near the pre-Covid levels.”
M&S is one of the retailers to put part of its Spring/Summer (SS20) line into 'hibernation' until SS21. Given that many retailers have SS20 stock still in warehouses that will distort their approach to new orders for SS21. The second wave of restrictions currently in place will also trigger problems with Autumn/Winter (AW21) as stock overhangs from the current trading season will then kick in to purchase order distortions in the middle of 2021.