Fashion Industry in the Pandemic COVID-19 Scene

by | Apr 1, 2021 | Study Insight | 0 comments

Knock down into the fashion related business.

Indonesia’s textiles and garment industry enjoyed positive growth throughout 2019 with exports valued at USD 13.8 billion, an increase from USD 10 billion in 2018 and making the country one of the largest textile producers in the world. The fashion industry is one of the developing sectors because of it. Currently, various fashion trends continue to develop, one of which is ready-to-wear clothes that carry a lot of fast fashion business concepts that have a character of fast fashion change and low production costs. Read more for fashion industry insights.

A Glimpse of Indonesia’s Fashion Industry

It is undeniable that the fashion industry is growing rapidly every year where every fashion model changes every time. Not only in the model and type of clothing, businesses engaged in this industry also creatively offer their products in a variety of ways. One of them is the online-based retail clothing company that makes it easier for buyers to buy their products.

In 2017, the fashion industry in Indonesia contributed 3.76% to the national Gross Domestic Product (GDP), with an export value of USD 13.29 billion. The fashion sub-sector in the creative economy was also the largest contributor in the previous year, 2016, amounting to 54.54% (Binus, 2019). Not only that, based on data from CNBC Indonesia (2019), the development of the fashion industry is able to contribute around 18.01% or IDR 116 trillion.

However, According to East Asia Forum (2020), Indonesia’s textile and textile product exports, which includes clothing, dropped by a massive 52% compared to the same month in 2019 in May 2020. This continues a worsening trend since March and April 2020 when exports declined by 14.6 and 38.9% respectively compared to the previous year. The largest export drop of 51%  is to the US market, the destination of 60% of Indonesian garments.

The End of Fashion Related Business

Business of Fashion (2020) noted that nearly three-quarters of listed fashion companies suffered losses due to the current pandemic situation. There was a 34% decline in sales in the January-March 2020 period when the COVID-19 pandemic had just exploded. By the end of 2020, the profit rate had fallen by 90% compared to 2019 according to an analysis by the McKinsey Global Fashion Index (2020). These three companies are the fashion-related businesses that got impacted by the pandemic situation.

Muji

Muji, a Japanese retail company that sells household decorations, stationery, to the famous minimalist fashion went bankrupt and closed outlets in several locations, one of which was in Indonesia. Muji filed for bankruptcy because they were burdened with debts of USD 50-100 million. Companies have felt the devastating effects of the coronavirus pandemic on in-store retailers. In Indonesia, there has been no official announcement regarding the failure of this retail company which is known for its slick quality. However, almost all Muji outlets in major malls in Indonesia have closed by selling out the remaining products at very cheap prices.

Source: IDN Times

Operating in Indonesia since 2009, Muji is known as a minimalist retail company with a fairly up-class market. Although the price is quite high when compared to the types of goods, Muji has managed to maintain its market until today due to the excellent quality of its products. Muji usually takes place in big malls in big cities like Jakarta. With new regulations regarding the COVID-19 pandemic in early 2020, operational restrictions in malls are affecting retail stores with visitor limitation thus affecting store income. This is a major source of failure in retail companies such as Muji.

Sorabel

On July 30 last year, Sorabel, as one of the fashion e-commerce in Southeast Asia, officially went bankrupt. Sorabel’s Co-founder and CEO Jeffrey Yuwono said that as the pandemic hit, the company’s cash reserves ran out even though it had received several investment offers. However, potential foreign investors cannot fly to Indonesia to verify the startup’s physical operations. Sorabel explains that the company has done its best to save the business, but that in the end, they have to go down the path of liquidation.

Source: Sorabel

The company started itself in 2014 with the Sale Stock brand, before it rebranded itself to Sorabel. The journey is quite long with various innovations that are claimed to successfully introduce themselves to consumers who have never shopped online, for example through the feature “Try First, Then Pay.” (Daily Social, 2020). The company’s business model is classified as the healthiest compared to e-commerce players in Indonesia, even in 2018, it was claimed that it had almost reached the break-even point (BEP) and was ready to make a profit but the pandemic is just another story for every business industry.

Centro

One of the fashion retailers from Indonesia that has also failed due to the COVID-19 pandemic is Centro. This retail company has closed its two outlets in two major cities in Indonesia, one of which has been running for more than 15 years. The two outlets are located in Ambarukmo Plaza, Yogyakarta and Bintaro X-Change, Tangerang, Banten. The closing process began with a massive sale of products sold in Centro.

Source: Republika

This closure was based on the company’s inability to survive with minimal income from buyers. The location of outlets located in shopping centers is one of the problems. Public concern about coming to shopping centers has made the level of visits to malls plummet. Even though there is a 50% limitation rule, in fact, the number of visits is already below that. As a result, there are fewer transactions and many are unable to pay rental fees (CNBC, 2021).

Lesson Learned from Fashion Retail Industry

The COVID-19 pandemic upended nearly every part of the fashion industry. This situation has put the fashion industry amid a hyperspeed evolution. Many retailers have filed for bankruptcy for these unpredicted challenges. However, many others seizing opportunities to transform their business-as-usual habit and find new ways of reaching and exciting their customers. Here are some ways to consider running a fashion business based on previous experiences in Indonesia.

In-store to online store

Source: Post Journal

Fashion retailers are rapidly changed into e-commerce strategy. Following the outbreak of the COVID-19 pandemic, overall e-commerce sales brought in USD 3.914 trillion in 2020 (Insider Intelligence, 2020). Retailers have had no choice but to embrace technology from online personal shopping consultations with physical store closures. Retailers should focus on increasing online sales, expecting consumer behavior to outlast the immediate crisis even as cities begin to reopen around the world.

Retailers that already had e-commerce traction are ahead of the curve, and many are increasing that reach through community-building virtual experiences. In-store experience will not be the same as the social restriction is implemented. Creating shoppable moments that coincide with big events such as Back to School, Independence Day, Mother’s Day, and providing engaging content and a brand story can help merge the virtual into reality. Now that customers have less physical access to the products they plan to buy, the power of brand-building and customer experience is very important. 

Many fashion companies, even luxury brands are offering online discounts to move as much stock as possible. Meanwhile, fashion companies with complementary digital and physical channels will benefit as shoppers pick up online orders from brick and mortar locations. 

Agile and adaptive

We all had to scramble to implement ways to keep employees and the public safe when the pandemic hit, and it had to be done quickly. Suddenly, customers are relying on home internet connections while the rest of the family is dealing with remote work or school. As shutdowns have been lifted and retailers are gaining more freedom, those safety protocols have needed to change. Much of the safety protocols implemented during the pandemic have been designed to avoid in-person contact altogether.

However, while keeping anyone who can work from home seems to be the solution, there are concerns about security where the balance of short-term and long-term objectives needs to happen. When it comes to purchasing habits, the future is always uncertain particularly when outside factors like the wholesale shutdown of in-store shopping can be triggered at a moment’s notice. The pandemic required a great deal of improvisation and agility on behalf of the retail sector to stem the tide.

Analyze current trends

Source: Elle

Customer behaviors have changed rapidly and are continuing to do so. During the pandemic, buying behaviors ranged from panic buying to emotional buying. The faster a company identifies a trend, the faster you can adjust to keep revenue flowing. Consider investing in technology to make the changing task easier by providing insight into patterns that will help surface the areas that could become disrupted or might require more attention.  

Times of panic also present opportunities to offer new products. For example, many retailers began selling face masks in the past months. Some of these moves might be for the short term only, but any move should also be evaluated for becoming long-term. Forecasting is also a big part of a benefit from the ability to accurately forecast, we can report on trends and analyze behaviors with powerful and intelligent reporting tools. It is vital to measure KPIs during times of disruption so we can spot opportunities and problems and act upon them.

Do omnichannel right to build customer connection

Retailers need to offer their products on the consumer’s preferred platform, providing clear communications and seamless experiences.  Generation Z and Millennials, pay attention to value intangible product attributes like how it’s made and how wasteful it is, and what other values the brand expresses in its actions. Start predicting what customers want based on previous purchases and provide valuable recommendations. Create segmented and targeted campaigns to get the right product to the right customer.

The engagement component is more than just consistent communications and seamless channel experiences, the customers also want to feel heard and feel that they matter. To share a brand culture and messages, social media is used by retailers for marketing and promoting but also for actively engaging with customers. Retailers can create polls, use hashtags, host live events, offer giveaways, and share exclusive items to those who interact with them. The post reviews and favorites products shared by customers make this an opportunity in using social media. Not only do retailers have an opportunity to win back a frustrated customer, but also can show other prospective customers care. 

Set Strategy with BRIGHT Indonesia

To enter Indonesia’s fashion and retail industry, it is crucial to have the right local partner. BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Business Registration and Establishment, and Management and Strategy Consulting that can help you in expanding, developing, and improving your business. We can register and establish your products and company, as well as obtain the work and stay permit in Indonesia (expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), limited stay permit (KITAS)) easier.

Our strategy consulting services domain focuses on supporting private sector clients with comprehensive and specialize development regarding the company’s needs and also on the public sector for a broader scope. 

For more information, email info@brightindonesia.net. 

Co-written by Anneke Julianita

For a no-obligation discussion about available opportunities or navigate business in Indonesia, please get in touch with Primadi Wahyuwidagdo Soerjosoemanto, Co-Founder & Principal Partner at info(at)brightindonesia.net, or Eric Lesmana, Managing Partner and Head of Consultant at eric(at)bright-Indonesia.net

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