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The Impact of COVID-19 on Apparel Industry

Author: Rishika Gupta

Editor: Sakshi Sanganeria

The Indian Apparel Industry has been affected both locally and globally. For businesses to setup for the lockdown in the span of a week was a unique case of crisis and stakeholder management.

The article explores the impact of lowered retail demand on key stakeholders such as employees, especially women, and the resulting labor shortage. The current situation brings into perspective the vulnerability of businesses in their struggle for survival and the article demonstrates how traditional businesses implemented work-from-home practices.

Finally, key factors about the long-lasting impact of COVID-19 on the future of apparel industry are considered to shed light on how businesses can refocus their strategy and adaptive capabilities for survival.



The Textile and Apparel Industry of India has been an integral part of the economy since hundreds of years. It is expected to grow to US$82 billion by 2021 (IBEF, 2020). India is one of the largest manufacturers of apparel. In line with the growing trends that promote a fast fashion lifestyle, this industry has been doing exceedingly well. India is able to sustain a competitive advantage in production since it has both- a robust textile industry that provides raw materials/fabrics and competitive prices due to low labor costs (IBEF, 2020). Apparel is produced to meet both local and global demand.

Hence, with COVID-19 halting global trade movement and plunging world economies into a recession like state, the Indian Apparel Industry is affected by both global and local policies. Apparel Retail Majority of retailers had to abruptly shut due to lockdowns across the globe. With consumers considering every dollar spent, there is a sudden and dramatic decline in apparel purchasing behaviour of consumers. This has left many retailers with unsold inventory as they work in a crisis management mode (Dowsett, 2020). As such, there is cost cutting and heavily discounted apparel being sold through online channels to recoup costs. Hence, the uncertainty affects the demand for future seasons that leaves several MSMEs in the Indian apparel industry in a survival mode. The main principle in outsourcing production to countries like India and China are the cost benefits they derive from both purchasing and technical economies of scale. With perceived low demand, retailers may demand lower prices for lower quantities that further pressurizes companies to break-even at best. With bulk discounts accounting for the low prices, lack of large order quantities and a growing government policy to retain factory workers during COVID-19, a lot of companies are at risk. In fact, 81% of the orders placed to Indian manufacturers have been cancelled due to COVID-19 citing aforementioned reasons. (Economic Times, 2020).

This is not like wine that gets better with age. Your inventory gets worse.”

-Emanuel Chirico, CEO of PVH Corp (Tommy Hilfiger and Calvin Klein) (Dowsett, 2020) Labour Shortage

An interesting occurrence is how the industry is facing a massive short-term labour shortage (Tagra, 2020). Sometimes we take it for granted that labour is expendable, and they are just a factor of production. But, they are human, and everyone is now realising their value. Human life is precious. Most migrant workers are fleeing to villages and hometowns to spend time with their family and be safe. As such, when the lockdown (with its multiple extensions/phases) was finally lifted and factories began to resume production, there was a severe shortage (high demand, low supply of labour). It was a wakeup call that often not even the most lucrative monetary compensation can compare to the value of human life and sense of belonging. If we were to consider Maslow’s hierarchy of needs, we are used to believing, that first come the physiological needs (such as money), then safety, followed by love and belonging. In these times of pandemic, we see that often these hierarchies undervalue the importance of family and overvalue money. Additionally, one could argue that safety is now the most important factor as businesses take precautions in workplaces and have to take mandatory health insurance. In an interesting contradiction, with increasing financial distress within companies and a need for cost-cutting, it is expected that the existing inequalities that affect women such as the wage gap as well as harassment and poor working conditions are expected to only worsen (Estrada, 2020).

Apparel industries account as one of the larger employers of women into the workforce. Southern regions of India are hubs of apparel manufacturing where families depend on both men and women to bring in income. They sustain themselves on daily wages. With a lack of demand, there is going to be more downward pressure on the labour force. However, this downward pressure is not expected to affect both genders equally. Women are expected to be further disproportionately disadvantaged as compared to men.

Surviving in the Pandemic The current business environment, not only for the apparel industry, is almost Darwinian in nature. With offices shut, all businesses had to either shut shop, or adapt to technology. A lot of Indian businesses tend to work in traditional ways and have no infrastructure to implement digitalisation. But, all of a sudden, they have watched YouTube videos, used the help of the younger generation, and provided portable technology to all employees. Why? So that they can continue working by implementing working-from-home. Two reasons observed are their motivations to do so is: firstly, the lack of safe transport to travel to offices, secondly, a cost-benefit analysis of investing in technology that has only been justified during the pandemic. There are yet a number of businesses that are not able to implement these practices and hence facing issues such as poor internet connectivity etc. which disadvantages them in a time of economic upheaval. The future of Apparel Manufacturing and Retail The entire experience of purchasing apparel is based on entering the store, feeling the garment, trying it on, and then deciding whether or not to purchase. With a few stores re-opening, we see more stringent sanitation standards and precautions, but we are yet to see how willing consumers are to take the risk to try on pre-worn clothes and the trust the businesses have to establish with their customers. Retail survived the advent of e-commerce because of such factors, will customer behaviour thus change? Recently, with fast fashion dominating changing consumer tastes and preferences, there was a short business cycle and agility in the industry to meet that demand. This has led to a lot of clothes being discarded, considered unfashionable, and giving the apparel industry a high carbon footprint. With such an overhaul of the industry, it hopefully leads to more eco-friendly and sustainable trends dominating fashion.

Conclusion

We see how the industry has adapted to meet the demands of suppliers, retailers, consumers, government, employees, environment, and competition to survive. We see how important the external environment has had on one of the hardest hit industries during the pandemic. The impact on social, economic and commercial aspects of this industry also highlights the interconnectedness of the world we live in.

After all, economics and businesses are all man-made concepts, even so, it is the survival of the fittest.


References

Dowsett, S. (2020, June 5). COVID-19: What should clothes retailers do with their mountains of unsold stock? World Economic Forum. https://www.weforum.org/agenda/2020/06/retailers-unsold-stock/


Economic Times. (2020, April 14). Apparel shopping goes phut in COVID-19 crisis. The Economic Times. https://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/apparel-shopping-goes-phut-in-covid-19-crisis/articleshow/75136706.cms?from=mdr


Estrada, C. (2020, May). Industries post-COVID-19: A gender-responsive approach to global economic recovery. Industrial Analytics Platform. https://iap.unido.org/articles/industries-post-covid-19-gender-responsive-approach-global-economic-recovery


IBEF. (2020, March). Textile industry in India: Overview, market size, exports, Growth...| IBEF. Business Opportunities in India: Investment Ideas, Industry Research, Reports | IBEF. Retrieved July 3, 2020, from https://www.ibef.org/industry/textiles.aspx


Tagra, D. (2020, April 24). Post COVID-19 challenge: Industry to face labour shortage | Apparel resources. Apparel Resources India. https://in.apparelresources.com/business-news/manufacturing/post-covid-19-challenge-industry-face-labour-shortage/

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