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Experts say, the EU-Vietnam Free Trade Agreement (EVFTA) is expected to provide a host of opportunities to Vietnamese enterprises to bolster exports. However, they must also meet the strict requirements in order to fully capitalize on the deal. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS), Giang said companies in the sector believe in the prospect of exports to the EU rising after the EVFTA comes into effect, as tariffs will be slashed to zero percent.
However, businesses need to be thoroughly prepared to make use of the opportunities and have a solid grasp of the regulations within the agreement, because the EU is a demanding market with strict requirements on product quality and design. Phi Viet Trinh, General Director of the Ho Guom Garment JSC, said that in order to benefit from the preferential tariffs under the EVFTA, products must have a certain proportion of materials hailing from the EU or Vietnam. Therefore, management agencies and businesses alike must take certain action to maximize the opportunities.
Nguyen Quoc Tuan from Vinh Thong Co, a footwear exporter to Europe, expects the EVFTA to boost exports over the remainder of 2020. Nevertheless, he also acknowledges that the company will encounter a range of difficulties in adhering to the agreement’s rules of origin, as while 60 percent of its input materials come from domestic suppliers the remainder come from elsewhere, primarily China. Updating technology and expanding production scale are also problematic given that the company’s internal resources remain modest.
The net revenue of American Eagle Outfitters’ (AEO) for the 13 weeks ended May 2, 2020, decreased by 38 per cent, to $552 million compared to $886 million for the 13 weeks ended May 4, 2019.
The company’s revenue by brands declined by 45 per cent, following a 5 per cent increase last year, while Aerie’s revenue decreased by 2 per cent, following a 28 per cent rise last year. Its digital demand, as measured by ordered sales, increased by 33 per cent. Aerie rose by 75 per cent and American Eagle increased 15 per cent.
The company experienced buying, occupancy and warehousing pressure due to the sales decline, Yet its customer engagement remained high as digital demand accelerated. The company is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle and Aerie brands.
For clothing brands that cater specifically to American middle class, the ongoing COVID-19 lockdown may turn to be a death sentence as driven by dwindling incomes and rising costs, customers have curtailed retail expenses. They may either opt for cheap fast fashion or go bargain hunting. This shrinking power of the American middle class will further drive retail apocalypse in the country as already profit margins of clothing brands have shrunk by almost 90 per cent since April 2020.
Store closures to affect neighborhoods
This may further force some underperforming stores and brands in the country to shut shop. Already retailers have closed around 9,700 stores in the country, reveals Coresight. Many of these stores may never reopen as these struggling retailers may use the pandemic to cull underperforming locations.
Closing of a store is never an isolated event; it affects the entire neighborhood that houses the store. For instance, JC Penney has 240 stores in 1,200 premium American malls.
Closing of these stores may bring down majority of traffic in these malls. A Credit Suisse report predicts one in four American malls will close by 2022.
Rise of the mall culture
Most of these malls were built between the 1950 and 1980, when Americans living in suburban towns had plenty of discretionary income to spend in these malls. But as most middle-class Americans lost their jobs during the Great Depression, their incomes dwindled and only affluent Americans in New York and San Francisco could spend at these malls.
Besides income, the tastes of these consumers also shifted. The strip mall emerged as a popular option for shoppers to pick up groceries and browse for shoes on the same trip. Millennials increasingly shopped online, preferring newer brands like Everlane and Reformation.
As a result, luxury sales in the country dwindled. A 2017 report from Credit Suisse reveals luxury sales in the country declined to $86 billion in 2019 and are further expected to decline to $56 billion in the next five years.
Retail landscape to change post COVID-19
Besides offering a mix of fast fashion and luxury brands, malls in America also offer other facilities like a Nickelodeon-themed amusement park, restaurants and a three-story candy department store to attract customers. However, post pandemic, even these may prove insufficient to attract crowds as customers will prefer to stay indoors and shop online.
In future, developers may convert many of these dead malls into entertainment centers, office space, e-commerce warehouses, health care centers and even community college campuses, many of these may simply end up as vacant lots.
Boston Consulting Group forecasts due to the COVID-19 pandemic, global luxury sales could plummet almost 35 per cent in 2020 compared to 2019. According to Abhay Gupta, Founder and CEO, Luxury Connect, a luxury brand management firm, India’s luxury market could take an even bigger hit than the global average as sales could drop almost 50 per cent. The Indian luxury market is much smaller than that of the US and China. April report of Statista notes this market will be worth $7,956 million in 2020 and grow annually by 10.6 per cent CAGR between 2020-23, with cosmetics and fragrances forming its largest segment.
Cecilia Morelli Parikh, Founder, Le Mill, a Mumbai-based luxury concept store feels, the phenomenon of revenge buying which helped the luxury sector to rebound in China, may play out in India too since consumers will not be able to travel for leisure—earlier, lower duties and taxes made purchases abroad attractive. However, Gupta believes it will have a different impact on different categories. Beauty and wellness category will the first to see sales surge as people are missing going to salon for self-care and wellness.
However, people are likely to become more conscious of the quality and quantity of clothes they buy especially luxury apparels. They may not prefer to invest in luxury fashion
without a tactile experience.
Luxury shopping becomes subdued
Just like in China, India’s luxury shoppers may display a demure, classic and refined trend which was popular in the last few seasons as they might not have as much money and will think hard about what they want to buy. Rather than flashy or ostentatious clothes, they will opt for more neutral colors and smart silhouettes offered by brands such as Jil Sander, Loewe and Phoebe Philo. Conscious consumption will replace conspicuous consumption amongst these affluent consumers.
Another trend that is expected to rise amongst these shoppers is the preference for online shopping. To satiate this need, retailers like Le Mill plan to launch their own website. The retailer is already selling 70 per cent apparels through whatsApp and home deliveries.
Emerging shopping trends
Besides going online, some luxe retailers also plan to implement appointment-based shopping once the lockdown is relaxed. Also, only 60 per cent of staff will be present in a store on a given day.
Similarly, Collective-one of India’s largest luxury retailers, plans contactless delivery system for the first month and a half. For this, the retailer will send out a few selected items for customers to pick and choose. This system can be availed by everyone, though it might work better for retailer’s existing customers.
Dolce & Gabbana will return to the Camera Nazionale della Moda Italiana (CNMI) this year. Since 1998, when the Milan-based label left Italy's highest fashion authority due to disagreements with the organisation's leadership at the time, the brand has hosted its runway shows outside of the official fashion week calendar. Now the label has revealed that it will participate in the first ever Milano Digital Fashion Week with a show scheduled for 15 July.
In light of the current circumstances, both the audience and the number of pieces on show will be limited, but the runway will be livestreamed via the online platform of the digital fashion week, which is being hosted by CNMI from 14 to 17 July. As for the presentation of the brand's Alta Moda couture collection, Dolce & Gabbana will release its own video.
The label notably participated in the organisation's recent "Italia, we are with you" initiative, which provided Italian defence forces with respirators and medical material during the Covid-19 pandemic.
Mulberry plans to cut 25 per cent of its worldwide workforce, the vast majority of which work in the UK. The high-end fashion brand, which is best known for its leather goods, employs 1,400 people, including 1,140 in the UK. The company would start reopening its UK stores from June 15. However, social distancing measures and reduced tourist and footfall levels are expected to affect its income.
Mulberry was founded in Somerset in 1971, where its two factories are still in production. The brand had been able to re-open stores in China and South Korea and, more recently, some stores in Europe and Canada.
It has 120 stores in 25 countries, but also ships to 190 countries around the world. Although digital sales of the brand have been good, it could not fully offset the fall in demand caused by store closures. Mulberry is one of the leading fashion brands that switched production from luxury goods to making medical equipment. Last month it had set its handbag factory in Somerset to making 8,000 gowns for NHS workers in Bristol
In response to a recent tweet by CrossFit, Adidas AG-owned Reebok has decided to end its partnership with the brand.
In response to a tweet by research firm Institute for Health Metrics and Evaluation that classified racism and discrimination as public health issue, Glassman, who is also the chief executive of CrossFit, had posted on Saturday, "It's FLOYD-19".
Glassman later apologised for a tweet that equated the police killing of a black man in the United States to the COVID-19 pandemic, after it drew widespread criticism.
The tweet related to the police killing of an unarmed black man, George Floyd, in the US state of Minneapolis on May 25 and was seen as insensitive.
Macy’s Inc has raised a total of $4.5 billion in funds, including $3.15 billion in new borrowings against its real estate assets, as the department store chain tries to navigate through the fallout from the COVID-19 pandemic.
The funding gives the retailer sufficient flexibility and liquidity to steer the business for the foreseeable future.
The company would be able to purchase new inventory as stores reopen and repay upcoming debts in fiscal 2020 and 2021.
Like other retailers, Macy’s has been severely impacted from store closures due to the coronavirus health crisis that forced governments to announce lockdowns to curb the spread of the infection.
The funds from the offering and existing cash will be used to repay outstanding borrowings under an existing $1.5 billion unsecured credit agreement. The retailer said it has amended the $1.5 billion credit agreement to reduce the available credit commitment and modify the agreement’s covenants.
Italian luxury company Gucci has reduced its environmental impact year-over-year by 21 percent. As part of its 10-year Culture of Purpose strategy, spanning 2015 to 2025, the company plans to reduce its total environmental impact by 40 percent within its direct operations and across the entire supply chain. It has also pledged to reduce by 50 percent its greenhouse gas emissions by 2025.
The company has extended sustainable processes and manufacturing efficiencies, such as the Gucci Scrap-less for leather, a program that runs in association with eight tanneries to significantly reduce the quantity of leather that is treated during the manufacturing process, leading to energy, water and chemical use savings, and Gucci-Up, a circular economy initiative focused on the upcycling of waste leather and textiles generated during the production process.
Gucci has switched to green energy, reaching 83 percent renewable energy for its stores, offices, warehouses and factories, with a 100 percent target by the end of 2020.
Tanzania plans to more than double its cotton production in the next five years as farmers increase cultivation, encouraged by higher prices for the fiber. The government’s goal is to boost its cotton production to 1 million metric tonne by 2025.
The country’s output for the 2020-21 season is expected to increase to 400,000 metric tonne from 348,882 tonne in 2019-20.
Cotton is Tanzania’s fourth-biggest cash crop after cashews, tobacco and coffee, and fetched the East African nation $68.4 million of export earnings in 2018. Output in Tanzania peaked in the 2005-06 season at about 370,000 tonne before falling to just under 133,000 tonne in 2016-17.
