The COVID-19 Australian TCF industry survey results are in

Here’s what our industry has to say

The Australian Fashion Council (AFC) is committed to supporting our members and broader Textile, Clothing and Footwear (TCF) community through these unprecedented times. Earlier this month, AFC established a short survey to gather information on how Australian businesses are being impacted by the current COVID-19 crisis; their challenges, needs, priorities, and where they see potential opportunities for our sector.

Directed to business owners, CEO’s and those in leadership positions across the Australian TCF value chain, the data was collected between 1st of April and the 15th of April, 2020, with a total of 182 responses.

“The immediate and unprecedented impact of this crisis has been immensely impactful on our industry and a large ecosystem that it sustains. The silver lining is that we are being forced to rethink the way we do things; from sourcing and manufacturing to selling and consuming. It is pushing us to gather our creative minds and considerable resources as one community to build a sustainable industry that exemplifies unity, innovation and vision. The AFC will continue to work with our communities’ key stakeholders, old and new, to innovate and disrupt in order to ensure our sector comes out on the other side of this stronger and better. We’re in this together.”

— Leila Naja Hibri, Australian Fashion Council CEO

The situation

The apparel and fashion industry is in crisis mode with 75-80% of companies agreeing or strongly agreeing to being negatively impacted by COVID-19. COVID-19 has significantly disrupted demand for almost all businesses and across all channels. Online, although down, is less impacted with businesses reporting a 56% drop in online sales vs. 87% drop in in-store sales. Where bricks and mortar Retail revenue has shown a significant drop for all – the impact on e-commerce sales is more variable with 20% of brands only seeing <25% drop in their online sales.

As a result of lower revenues, many businesses are struggling to meet their obligations. Casual worker costs and retail space expenses are the hardest to meet for most companies, with 60-75% of businesses struggling to cover the costs related to commercial leasing obligations, including both HQ and Retail,  and ~65-70% unable to meet the costs related to casual employees and contractors. The implication is that many businesses in this sector are significantly impacting the livelihood of their workforces by letting employees go (26% of companies), standing them down (25% of companies), enacting forced leave (22% of companies) and reducing hours (57% of companies).

Cash flow issues have been a major contributor to the above with 84% of companies identifying that they are now faced with excess stock from the decline in demand. Locally, the issue of excess stock is impacting most businesses, with larger companies tending to have more issues with logistics and fulfilment vs. smaller companies. Excess stock implications are also affecting businesses with offshore supply chains with smaller companies proving to have more challenges in this area than their larger counterparts.

Unanimously, businesses face uncertainty in terms of a recovery timeline due to the looming recession that is being predicted as a result of the depreciation in the Australian Dollar combined with questions about consumer sentiment and purchasing behaviour on the other side of COVID-19. The road to recovery will be long with only 34% of the sector being confident that they can rebound financially and 54% believing it will take more than a year. Larger businesses are more confident that they can recover but think it will take longer.

Many respondents are also expecting a shift in societal and financial values and, as a result, are predicting a decline in the consumer demand for TCF merchandise. Businesses expect to be held more accountable for the full range of externalities in their value chain that impact societal and environmental well-being.

The support needed 

With these implications, Australian businesses are looking for support across a range of issues; financial, from both local and federal government, operational, with clear rules and guidelines around post-lockdown reactivation, and strategic, for pivoting and reviving businesses.

Broadly, businesses are calling for financial assistance in a timely manner that caters to the needs of the TCF sector, and in hope that it will continue once the immediate health threat is controlled, allowing time for the industry to recover.

The industry is also looking for demand support through the prioritisation of locally made and sourced products, as well as fostering collaboration across sectors and within the industry. Key sentiment from industry calls for;

• Government investment in local manufacturing with incentives, and a nation wide review of procurement guidelines

• Fashion festivals, retailers and industry bodies to advocate for and prioritise local design and manufacture

• Initiatives supporting diversification of local capabilities, upskilling workforces and job creation

• Strategic market guidance - what to anticipate on the other side of Covid-19 and how to best prepare - eg. digital strategy, merchandise planning and reaching local and global markets

At the time of the survey, ~75% of respondents had plans to access government support, predominantly through JobKeeper and ATO credits, with most applying for 2-4 different types of support.

An opportunity to become more local, digital, sustainable & collaborative

Around 55% of companies are proactively responding to the situation by developing ’post-covid’ strategies in particular via the amplification of digital sales and marketing initiatives. Creating new digital offerings was top of the list, with ~45% increasing digital marketing and amplifying their digital channels.

There is clear opportunity in (and a desire for) our industry coming together, calling for collaboration within and across sectors. Identified were the prospect for pooled resources and industry joint ventures to modernise Australian manufacturing and become globally competitive. Collaboration is even more apparent as an opportunity for smaller brands and sole traders; from co-working spaces, to overcoming MOQ’s, to joint workshops and co-owned assets and equipment. 

Industry voiced a renewed energy for investing in Australian supply chains, in-house manufacturing, hiring more staff locally and becoming vertically integrated. Note was made of the opportunities that would come from better connecting manufacturing capacity/capability with demand, from recognising and working toward bridging the gaps in the local supply chain. There is significant opportunity for government investment and process reviews to support the sector through this crisis and into a globally competitive future; from local government tenders prioritising locally made goods, through to PPE production and support for the industry to adapt to diverse and economically and environmentally sustainable manufacturing needs.

Overall, respondents identified a desire to nurture the demand for Australian designed, owned and made TCF products. Global consumer markets and retailers stand to provide new sales avenues for Australian fashion. There is great potential for the Government to support activities to increase the global awareness of Australian fashion brands as well as assisting in the creation of group opportunities at international fashion and trade events.

Diversifying markets and product offering, pivoting production capabilities and creating and growing digital realms of business were a common theme identified by businesses as future opportunities for growth. Drivers identified included partnering with other e-commerce retailers, reinventing online business models and expanding offerings to include services and knowledge. 

From any crisis emerges a need to rethink current systems and create new business models. Embracing more sustainable practices, working toward a circular economy and shifting the dial on recycling fashion waste are central to many Businesses' outlook for the future. Note was made of investment in smart infrastructure, clean energy, tech innovation, using more Australian natural fibres, building regenerated and recycled fibre processing capacity, and the need for State and Federal Government policy to support the implementation of a product stewardship scheme, similar to that implemented on e-waste and plastics. There was also a desire to set progressive and aspirational policy to incentivise industry to address climate change through adopting the United Nations’ Sustainable Development Goals and Paris Climate Agreement targets.

We’re in this together

The AFC wants to thank all the respondents who took the time to help distribute and participate in this survey. With survey insights supported by McKinsey and Company, findings will be presented to both State and Federal Government representatives in an effort to advocate for policies that better assist Australian businesses in the TCF industry and will also help shape the AFC’s short term survival tactics and longer term innovative strategies that will be specifically designed to support the recovery and revival of its industry. 

Author: Australian Fashion Council

Image:Unsplash