Bankruptcies in the Fashion Industry – What This Means for Us Fashion Professionals

That the fashion shops would have to temporarily close for our safety during the crisis was already hard enough. That they may now reopen again has unfortunately not always brought the relief that one had hoped for because the customers are simply not yet in a buying mood. There simply aren’t a lot of impulses to add a new fashionable outfit to one’s wardrobe right now. Why do this when one can only wear it on the sofa?

The consequences of this: No sales but continuing costs, the assets become exhausted and bankruptcies follow. Either as a self-managed bankruptcy if hope still exists or immediately as a hard total bankruptcy.

2019 was already no easy year for the fashion industry. Whoever had been gravely stricken then now has few resources to ward off the current crisis. Consequently, we now unfortunately see some big names who have had to and/or will have to discontinue their operations altogether.

Pure fashion groups are among them, but also large retail chains. If then almost every second branch is supposed to be closed, this affects not only one’s own employees (solely in one single case, approx. 5,000 jobs are at risk) because often the retail chains are important shop-in-shop-carriers. As the result of the closure of their space, then additional fashion companies will also have their basis taken away from them who rented their shop space at the branches. They will then practically also be forced into closing as well. If the same affects a large portion of the branch network, this can also quickly mean the “end of the line”.

Whoever is able to continue to use his sales space and wherever there are still sufficient resources available: He will conversely have better requirements for making it through this difficult time. But what can one do when there simply aren’t enough customers coming into one’s shop? Attempts to make up for the insufficient customer shop visits by offering online services can usually hardly cover the losses suffered. In many cases, the costs are higher than the proceeds.

Precisely wealthy generations do not necessarily have an online affinity and would not like to disclose their data on the Internet. In addition, they value the social contact during their shopping experience. These generations do not so easily embrace online shopping.

It is like a domino effect in the fashion industry: One stone falls and then gradually others also fall. Already this knowledge has psychological consequences – including also for the employees. Existences are at risk. The looming loss of a job, the possible loss of income, but nonetheless the living costs must continue to be paid: This is a very heavy burden right now. If families have possibly purchased a house, it must now continue to be financed. Will the financing also work in the future? If one somehow retains one’s job, will the unemployment rate also be under control next year as well?

Currently, probably no one can earnestly answer these questions. It is indeed not at all clear how long we will still have to follow all these extraordinary rules.

Even the fundamental effects are difficult to predict. For example, what effects will the latest developments have on globalisation? Will more products once again be produced on-site? If yes: Will this also apply to fashion?

These issues are being anxiously examined in countries which have been possibly more drastically affected and, at the same time, have high strategic importance as supplier countries. Bankruptcies on the other end of the world can indeed also result in bankruptcies here.

Finally, the question regarding where all of this – including the newly-escalating mountains of debt – will still lead. Will it become worse than the financial crisis in 2008/2009? Is even a new version of the global financial crisis of 1929 looming?

What I mean: Currently, much is only speculation. Correspondingly, it isn’t particularly helpful to address future negative scenarios.

Precisely when one’s own future is unclear, it can conversely be very helpful to develop positive plans.

What possibilities exist, for example, to make the shopping experience even more attractive? I believe that, for example, appealing to special target groups in one’s own thematic context could lead to persons returning to the shops who currently see little reason to do so.

Whoever is now working as an employee in the fashion industry and is currently worrying about the security of his own job position can likewise become proactive. A specialised Personnel Consultant can provide the opportunity to discreetly examine one’s options and can likewise provide tips regarding in what direction one can beneficially expand one’s knowledge via continuing education classes.

One thing will also be certain this time as it always is: During crises, there will be market participants who struggle to maintain their market position and ultimately declare bankruptcy. Likewise, there will also be employees who unfortunately lose their job – at least temporarily. But, this time as well, there will likewise be many persons who emerge stronger from such a crisis. If you now take the correct steps, you will also be one of them.