Crisis 2022 / Way Out Commentary

Now Is the Perfect Opportunity to Market Reduced Sales as Planned Degrowth

Unlike fast fashion trends, each recession is unique. It’s quite unlikely the world will see the same increased productivity and production as the way out of the current mess as earlier. This time, however, the keywords would be different: effective sourcing strategies, multiple revenue streams, and sustainable products and practices.

Samantha Taylor

16 November 2022

5 minutes

Long Story, Cut Short

Climate change has shown we’ll all suffer the same fate if we don’t work together. Never have all of humanity been tied together for the same goal—survival.
Unlike fast fashion trends, each recession is unique.
Financial assistance is required for suppliers in the Global South to decarbonise.

Unlike fast fashion trends, each recession is unique. This time we could see the same increased productivity and production as times past—in part due to the rising awareness of our environmental impact, and the maxed-out credit limit of global governments. Add in the embers of a global pandemic and a Russian invasion, and it’s looking rather like the last days of the USSR. It’s all falling apart.

Turning and turning in the widening gyre Unlike fast fashion trends, each recession is unique. This time we could see the same increased productivity and production as times past—in part due to the rising awareness of our environmental impact, and the maxed-out credit limit of global governments. Add in the embers of a global pandemic and a Russian invasion, and it’s looking rather like the last days of the USSR. It’s all falling apart. Markus Winkler / Pixabay

Recessions ripple.

The waves from initial impact—felt long after the headlines—have moved on. Indeed, the 1929 Great Depression had lasted a whole 43 months, as ripple after ripple ravaged the US economy. There’s no reason to think this one is going to be any shorter. But, that can be a good thing—like a cobra shedding an old skin. It’s all about growth. But this time won’t be about growing profits. Instead, I’d wager it would be about growing collaboration. If nothing, climate change has shown we’ll all suffer the same fate if we don’t work together. Never have all of humanity been tied together for the same goal—survival.

Yet, we still live in a capitalist world, and that’s not going to change any time soon. So, can we ensure sustainability? Not just for the world, but for our brands as well? Fortunately, there are lessons we can take from the 2008 recession. While officially that recession had lasted only 18 months, the ripples on the apparel industry changed the market as we know it.

I attribute the 2008 recession to the downfall of family businesses over the preceding six years, and the scaling back of established British suppliers such as Dewhirst. Although we shouldn’t discount the globalisation of the UK’s New Labour policies too. Yet, where black holes arise, there too is opportunity. Li & Fung would not be the beast it is today without that recession. Neither would brands such as Gymshark, which have achieved similar success. No doubt their offering is inspired. But the recession primed the market.

Unlike fast fashion trends, each recession is unique. This time I doubt we will see the same increased productivity and production as times past—in part due to the rising awareness of our environmental impact, and the maxed-out credit limit of global governments. Add in the embers of a global pandemic and a Russian invasion, and it’s looking rather like the last days of the USSR. It’s all falling apart.

2006 was a boom year for many in the sports and outdoor industry. Fast forward a few years, and the market was flipped on its head. During that period, one family business had gone from being the largest outdoor company in Eastern Europe to near irrelevance. While they weathered the 2008 recession well, they didn’t see the ripples coming.

By 2010, brands such as North Face and Berghaus were using Eastern Europe as a dumping ground for excess stock, having had no foothold there before 2008. Indeed, it was rather reminiscent of the Russian markets—those coming across the border, selling their belongings to ensure survival. It coincided with the rise of Polish outdoor brand 4F, who used cheap materials to undercut the brands who were still pushing performance over price.
Today, those family brands are no more. 4F has massively expanded throughout Eastern Europe. And the well-known western outdoor brands are plodding along. After a shaky start to the year, sales have done OK. The news isn’t so good for the likes of Nike and Adidas however, who have posted warnings on excess inventory. We’ve not heard the same warnings from the outdoor brands, who perhaps have learnt from the stock dumps of 2010—ones which Nike are already starting to imitate this time around.

Samantha Taylor

Samantha Taylor is a 3rd generation garment producer with 20 years industry experience. Samantha established The Good Factory in 2020 to provide complete supply chain transparency and bring sustainable products to a wider audience by working directly with brands.

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So, what did we learn from this period, and since, that can help guide businesses through the coming ripples?

First, sales are going to reduce, which makes a fire sale tempting. Especially, when it coincides with Black Friday. But if your cash flow is in good order, it’s better to follow the example set by Primark. By spreading the full price sales period of items, you can compete against newer items being launched by the competition. Especially so, as those will invariably come with higher mark-ups from the energy instability, shutdowns and a reduced workforce.

In addition to expected sales reductions, margin reductions should be expected. The sooner we accept the end of 70-year-high corporate profits, the better we can plan for longevity. Energy instability, raw material shortages and a cost of living rise globally mean the price of goods is going to increase. Don’t be fooled into thinking that will reduce the cost of the recycled materials, though. That came with a marketing surcharge to begin with.

What is no longer possible, and never morally correct, is targeting discounts through suppliers first. Our supply chains are not as secure as they once were. Pushing for price reductions down the chain is likely to break them. After Rana Plaza and the work of organisations such as Labour Behind the Label, there is increased awareness of working conditions within garment supply chains.

Customers will be expecting profits to be spread throughout the chain, with brands expected to ensure distribution to sewers. Financial assistance is required for suppliers in the Global South to decarbonise. There is rising anger amongst suppliers when brands force ESG targets without providing finance.

Effective sourcing strategies can limit the pain felt by brands. Mainly, when more than just the landed price is taken into consideration. Lead times, replenishment capacity, distance from point of sale, delivery spread, and financial stability are factors to consider. It should go without saying that brands should have experienced supply chain experts within their teams. No one needs a Shein ‘3p per garment’ exposé in this climate.

Second, growth is only going to be achieved by going after market share across multiple revenue streams—instead of increased product sales driven by increased demand. In periods of less turmoil, the news of a bigger market share by M&S would have made more headlines. The fact that it coincides with a bleaker outlook should not diminish the incredible success of a strong product and retail strategy. Even if a lot of it is being rewritten as I write.

The sooner we accept the end of 70-year-high corporate profits, the better we can plan for longevity. Energy instability, raw material shortages and a cost of living rise globally mean the price of goods is going to increase. Don’t be fooled into thinking that will reduce the cost of the recycled materials, though.

Many brands are already establishing peer-to-peer resale platforms. While it’s impossible to ignore the importance of digital strategies going forward, an off-shelf platform designed to take a percentage of resale items, where the sales process is entirely managed by the customer, is unlikely to age well. That’s before we address the lack of information around the online safety. Now’s a good time to know that Depop and eBay provide anti-bias training to all their customer facing staff.

Financing for expansion will be tied to emissions reduction before the decade is out. Brand’s environmental pledges are being missed quicker than news cycles can keep up with. We’re all in the climate crisis together, after all. So, pressure is likely to start ramping up across all areas of business. Keeping products in use through improved quality and repair has a better environmental footprint than resale platforms alone. Especially when product longevity has not been addressed before resale.

Finally, it makes business sense to move towards sustainable products and practices. Now is the perfect opportunity to market reduced sales as planned degrowth. There is data to show sustainable ranges have a higher full price sell through. Sales are increasing by up to 20% when there are proven sustainable business practices. If you haven’t yet done so the time is ripe to pick the low hanging fruit, before legislation pushes you down paths your business isn’t suited for.