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A forecast by management consulting company Wazir Advisors, which focuses specifically on the apparel sector, predicts a decline in apparel consumption in 2020 of 45 percent in the EU and 40 percent in the US, which could lead to a reduction by $300 billion
Wazir Advisors’ states EU and the US Apparel consumption’ states will reduce by $300 bn. Covid-19 will impact European and the US apparel market with the current lockdown likely to continue until mid-July because new cases are expected to peak by late April/mid-May. This would imply a total three to four months closure for almost all the brick-and-mortar fashion stores across the US and Europe.
Even if online retail remains the only way to buy clothes for a few months, apparel purchasing will be delayed. The report gives various reasons for this: On the one hand, consumers are currently primarily buying groceries, medicines and other staples. There is no urgency to replenish clothes, especially because the options to go out are limited with schools, offices, restaurants, gyms, etc. still being closed). On the other hand, consumers have limited product options and potentially long delivery times.
To offer relief to businesses and individuals affected by the COVID-19 pandemic, India’s department of commerce introduced several relaxations and an extension in deadlines with regard to compliances mandated under its schemes and activities, including the Merchandise Exports from India Scheme (MEIS) and the Rebate of State and Central Taxes and Levies (RoSCTL).
The Foreign Trade Policy (FTP) 2015-2020 and Handbook of Procedures (HBP), which were valid till March 31, have been extended by a year. Export obligation periods have been extended for expired or due to expire advance authorizations and Export Promotion of Capital Goods (EPCG) scheme authorizations.
The last date for filing MEIS claims is one year from the Let Export Order (LEO) date of each Shipping Bill, and another 2 years beyond that with imposition of a late cut. The last date of filing MEIS claims without late cut for all Shipping Bills for which the initial one-year period expired / will be expiring on or after 1st Feb 2020 and on or before 31st May 2020, has been extended by 3 months beyond the expiry date of the initial one-year period.
For developers of special economic zone (SEZ) units, various relaxations have been allowed. The Export Credit Guarantee Corporation Ltd. (ECGC) and the Director General of Trade Remedies (DGTR) have also offered several relaxations.
Employees at global fashion giant Inditex's 10 logistics centers in Spain – from where it sends garments to its stores worldwide – returned to work recently but only to less than half their normal levels of activity. Meanwhile, just three of Inditex's 13 Spanish factories are back at work, making medical supplies like scrubs to help fight Spain's Coronavirus crisis, with no garments being made for now for brands like Zara and Bershka.
Spain recently loosened the terms of a strict lockdown, brought into force to halt the spread of one of the deadliest outbreaks of the virus worldwide, allowing nonessential workers to return to their jobs after a two-week hiatus. Staff at the Inditex logistics centers returned to work but at reduced schedules – either working half days or just two or three shifts a week – to reduce contact between employees, a union representative and a worker said.
Rather than entering the facilities all at once, shift workers had staggered entries and exits and wore masks and gloves while maintaining 2-meter distances from colleagues. Just 15 per cent of normal activity was maintained at one of Inditex's 13 Spanish sewing factories, one worker said, focused on maintenance of machines rather than production of clothes.
Department for Promotion of Industry and Internal Trade (DPIIT has sent a letter to home secretary proposing that if the on-going lockdown is extended beyond April 15, those companies and MSMEs with export commitments be allowed to operate with minimal manpower and necessary movement of material.
It also suggested that 16 sectors, which includes telecom equipment, gems & jewellery, steel and ferrous alloy, automotive units, defence manufacturing and all units in Special Economic Zones (SEZs) and Export Oriented Units (EOUs), be allowed to operate adhering to safety, sanitisation and distancing norms.
FIEO had earlier warned that with cancellation of over 50 per cent of export orders in the last few weeks due to coronavirus disruptions worldwide there was a chance that there could be 15 million job losses in export units. India’s goods exports declined 1.5 per cent to $292.91 billion in April-February 2020 compared to last year. Exports increased marginally in February 2020, but are expected to fall in March 2020 because of the breakdown in production, supply and payments.
The COVID-19 pandemic will magnify systemic inequality that results in forced labor and modern slavery, the World Economic Forum (WEF) warned. More than 40 million people are estimated to be trapped in conditions of modern slavery, including 24.9 million in forced labor and 15.4 million in forced marriage, according to the International Labour Organization (ILO), a United Nations agency. One in four of them are children. Women and girls, who account for 99 percent of victims in the commercial sex industry and 58 percent in other sectors, are also “disproportionately affected” by forced labor.
With the Coronavirus crisis worsening living situations for months to come, those same people are now at even greater risk, the WEF said. Not only do they lack access to adequate healthcare, but their already restricted movements are further hamstrung by border closures and travel disruptions. Worse, they’re susceptible to stigmatization and discrimination by nativist rhetoric and politics.
Even migrant workers who wish to return home are unlikely to be able to do so safely for a long time. While countries such as Australia have proposed extensions for seasonal worker visas, such overtures are few and far between. Demand for labor—forced or otherwise—is also expected to ebb as the infection tightens its grip on markets, placing those already at high risk of exploitation even deeper in harm’s way
At the same time, risk of enslavement will surge, the WEF said. As the economic fallout from the pandemic continues to batter livelihoods, there will be an increased supply of workers vulnerable to exploitation due to poverty. The ILO estimates that COVID-19 could gut 25 million jobs and send global economies into a freefall if governments do not take adequate action.
A recent report by KPMG asks the Indian government should consider announcing a comprehensive financial support package along the lines announced in Germany and the US, international consultant
For medium to long term, KPMG suggests that government to provide an adhoc reimbursement/ concession of 5-10 per cent against the recently approved Remission of Duties or Taxes on Export Product (RoDTEP) scheme to compensate for the hitherto unreimbursed levies and taxes to the exporters.
From a manufacturing perspective, employment would be impacted owing to limited demand in both domestic and international market, and the textile and apparel sector production is expected to decline by 10-12 per cent in the April-June quarter, the report titled 'Potential impact of Covid-19 on the Indian economy' said.
Cotton fibre prices are expected to take a hit, states the report. While prices of imported man-made fibre (MMF) used for high value products is expected to rise by 25-30 per cent over the next two quarters (April to September 2020). Fabric production is expected to decrease owing to decline in exports and stagnation in apparel/home textiles production. Apparel production is expected to contract by 18-20 per cent, as per industry sources, owing to decline in global demand. Home textiles industry has had limited impact of the Covid-19 induced global downfall
Spurring the biggest economic contraction since World War II, COVID-19 has hit every sector from finance to hospitality. Its discretionary nature makes the sector particularly vulnerable, say McKinsey & Company and Business of Fashion in a Coronavirus update to the ‘State of Fashion 2020’ report. The average market capitalization across apparel, fashion and luxury players witnessed a bigger drop from January through March 24th than the one experienced by overall stock market. The report reveals, revenues for the apparel and footwear sector are expected to contract between 27 and 30 per cent year on year in 2020.
Loss of jobs and financial hardships
Future outlook for the luxury sector is worse with contractions in the sector pegged between 35 and 39 per cent. If brick-and-mortar stores remain closed for two more months, almost 80 per cent of publicly listed Western brands are likely go bankrupt in the next 12 to 18 months
Humanitarian repercussions will also reverberate across fashion as millions across the value chain will either lose jobs or face financial hardships. Already, factories across Bangladesh, India, Pakistan and Myanmar are in crisis with workers taking to strikes and protests for pay as owners dealing with cancelled orders. It’s a conundrum even that governments in these sourcing countries are ill equipped to face.
Brands to reinvent value chains 
The report says, quarantine of consumption could heighten expectations for purpose-driven, sustainable action. To meet these expectations, fashion players will have to adapt their operating models. They should adopt a recovery position based on impact severity to help prepare for the deployment of a recovery action plan. This will involve reassessing their geographical footprint, store network and growth opportunities.
Brands will also have to reinvent their value chain besides reviewing production regularly, considering a recalibration of fashion’s cadence, and strengthening regional integrated supply chains. They should also double-down on recovery and resiliency measures for this. Only then can they begin to decipher what their “new normal” actually looks like.”
The survey reveals over 65 per cent consumers in the US and Europe plan to decrease their spending on apparel. This will compel retailers to offer steep discounts to clear inventory overflowing in warehouses, as well as leftover spring goods, and make up for lost time with closed stores.
Creative and innovative thinking to boost sales
Fashion companies will be forced to consider innovative ways to shrink stock and accelerate nascent sustainability trends. Some other ways they can increase sales is by personalization, customer experience and a re-evaluation of the company’s fashion calendar, such as moving monthly drops into later seasons. They will also have to scale up and strengthen their digital capabilities.
Mckinsey says, the only way forward for fashion companies will be innovation with creative, critical thinking extended across all points along the supply chain. Brands will have to rethink their fashion cycles leading them to skip a season and forcing store merchandise to fall in line with the current season. As more brands and retailers embrace 3D sampling and virtual production, go-to-market processes will revamp their operations with more companies embracing nearshoring and leveraging new manufacturing processes for capsule collections.
Sustainability to be the way forward
Sustainability will become the new way to value businesses as consumers will retreat from over-consumption and irresponsible business practices. Companies will have to introduce new tools and strategies across the value chain to future-proof their business models. They will have to harness innovations in order to make radical and enduring changes to their organisations.
The disruption in trade with China has made British retailers reconsider the wisdom of having long supply chains, and turn back to British manufacturers. Suddenly, security of supply — and not cost — is paramount. Textile companies in Leicester are getting a boost from COVID-19, the disease caused by the new coronavirus. Alkesh Kapadia of Barcode Design, a local fashion manufacturer, said that he’d received a flood of orders from worried customers.
Manufacturers having their own supply chain have been hard hit by the Coronavirus. Italy, for example, is a major supplier of yarn. Kate Hills of Make It British, a manufacturing advocacy group, said that British clothing retailers and brands are now focused on sourcing their fabrics domestically. One of the biggest economic casualties of the crisis could be the international supply chain which will help Britain’s textile manufacturers.
Though manufacturing in China, the original epicentre of Covid-19 pandemic, has largely recovered but now shutdown in the rest of the world are threatening the supply of key parts and demand, EU Chamber of Commerce warned. Some overseas orders have been scrapped as the pandemic ravages the economies of China's trading partners, with many privately-owned exporters firing workers and warning about factory closures in the near future.
Even European companies manufacturing in China for Chinese customers are not insulated, as these customers may depend on exports to Japan, the United States or Europe. While manufacturing has been coming back, companies are vulnerable to supply chain issues potentially stopping the arrival of key parts
China's travel restrictions — which currently stop all foreigners, including those holding residence visas, from entering the country — also creates major problems for chamber members.
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