6 reasons why British clothing brands have faced a perfect storm in 2021 (and how they can weather it in 2022)

From Brexit to the global shipping crisis, the last 18 months have dealt a series of body blows to the UK clothing industry. But, there are ways businesses could adapt to become smarter, fitter and more resilient.

2020 was a tough year for the high street with nearly 180k jobs lost and some once-unassailable names disappearing – Arcadia Group (including Topshop and Miss Selfridge), Laura Ashley and Peacocks. 2021 has been just as bleak with The Centre for Retail Research (CRR) predicting 200k in retail job losses; Debenhams, House of Fraser and Gap have all closed stores so far this year.  There are a number of reasons behind these recent retail failures (arguably some of these brands had already lost their way due to years of corporate mis-management and under-investment) but the next swathe of closures are likely to be still-popular brands attempting to survive the worst set of retail circumstances for decades.

Here are 6 obstacles these brands will need to overcome – and how they can future proof themselves . . .

 

1.  The First Lockdown
The planning for the 2021 spring/summer ranges would have started just when lockdown was announced in March 2020. Most retail ranges take at least 52 weeks to design, plan, manufacture and deliver to the UK from Asia (slightly less from Europe). But understandably, many teams were not prepared for the sudden switch to remote working and time will have been lost whilst teams adapted to the virtual workspace.

These key lost weeks at the start of the sourcing critical path had a significant impact further down the line. Evidence of this includes retailers advertising ‘new high-summer’ ranges in June and July that would ordinarily have been launched in April and May with unsold stock reduced in the summer sales. If they cannot shift a decent proportion of these ranges at full price, it is doubtful that they will make sufficient profit this year to tide them over until next season.

 

2.  Collapsed Manufacturing Suppliers
Many clothing manufacturers in India, Asia and Turkey reported being unpaid for finished goods due to many global brands reneging on sourcing deals and payment terms. Analysis of global trade figures by the Center for Global Workers’ Rights (CGWR) and the Worker Rights Consortium (WRC) estimated that garment factories and suppliers across the world lost at least $16.2bn in revenue in Q2 2020 as brands cancelled clothing orders or refused to pay for completed orders.

This will have, inevitably, put many suppliers out of business permanently. In May last year only 60% of Turkish clothing manufacturers had managed to reopen after the devastating impact of cancelled orders or non-payment of dispatched orders by big brands. The WRC has since published a COVID 19 tracker of which brands were acting responsibly towards suppliers, and which were not.


3.  Supplier Covid Hangovers
Even for those manufacturers still operating, output has been affected by availability of labour during country lockdowns, leading to order fulfilment falling behind schedule; also, required fabrics invariably come from other parts of the world. For example, the majority of cotton grown in America or China requires global shipments to be carefully synchronised with the rest of the manufacturing supply chain. Just a few weeks delay in any part of the supply chain means that critical UK sales windows can be missed before stock needs to be discounted to maximise turnover.


4.  Brexit
European manufacturing will have been hit with further Brexit-related delays; exporting to the UK now includes complex EU paperwork and reporting requirements, though UK importing customers checks have been postponed again until January 2022. The hassle factor of delivery to the UK will have pushed up the cost of transport alone.

In Q1 2021, Bloomberg reported that the average for quoted courier rates has increased by a third to half of their previous value between November 2020 and February 2021. Many European drivers will avoid driving routes to the UK after their experience of Christmas 2020. When France closed the UK border on 21 December for two days, it prevented up to 10,000 lorry drivers from getting home in time for Christmas. Although the official reason for the closure by the French Government was the emergence of the COVID Alpha variant in the UK, many drivers believed that it was playing politics in the run up to the Brexit deadline of 31 December.


5.  Shipping and Freight Cost Increases & Delays
Sea container shipments from further afield have also seen cost increases. The Telegraph reported on 29 August 2021 that average Asia-North Europe shipping rates for a 40 foot container climbed to a new high of $13,706 – nearly 800% higher than March 2020. All of these costs need to be absorbed by the retailer or passed on to increasingly price sensitive customers.


6.  Late Arrivals & Chinese Port Closures
The blockage of the Suez Canal for six days in March was another blow to retailers. The backlog involved more than 400 global container ships with a cost of goods worth £7 billion and an estimated 60 days needed for the canal to resume normal volumes. This had a significant knock-on effect on UK arrival times, with major delays in some summer products – orders for garden furniture have been fulfilled two to three months later than planned.

More delays will have been caused by the two-week closure of Ningbo-Zhoushan port due to the COVID-related quarantine of dockworkers. The Meishan terminal has, according to recent reports, started to berth container ships again but is unlikely to resume full operations for several weeks. Ningbo-Zhoushan port is the largest port servicing Zhejiang Province, a key region for cotton and synthetic textile manufacturing. Reduced export volumes as a result of the temporary closure are already predicted to negatively impact on the availability of stock for Black Friday and Christmas. With six of the world’s top 10 busiest container ports and average door-to-door sea freight times of six to eight weeks, any new port closures in China between now and the end of October really could play havoc with Christmas availability.

The good thing is none of these problems are set in stone because there are number of business survival tactics which brands can adopt.  Read on to find out how Ellis Kane Consulting can help you to adapt and future proof your brand.


1. Strategy, Growth & Profitability
Ellis Kane Consulting can support a strategic review of your business including the assessment of your routes to market; helping to clarify which to reinforce and which to dismantle. Using a variety of analytical tools and rapid financial modelling techniques, Ellis Kane Consulting can help to quickly assess future strategic options, alongside likely profitability, and can help to provide certainty about the future of your business.
 

2.  Cash Flow Management
With the repayment of Government-backed COVID business loans starting to kick in, businesses need to know the forthcoming peaks and troughs of future cash flow and understand the probable outcomes of various financial scenarios. Ellis Kane Consulting is highly experienced in building bespoke cash flow models and tackling the root causes of operating cash flow issues, ensuring that any negative issues are identified and resolved well in advance of a liquidity crisis.


3.  Supply Chain Management
What is the health of your supply chain? Do you have weaknesses that need to be uncovered and addressed? Do you know the business health of your key suppliers and customers? Do you need to shorten your supply lead times to build in more resilience and flexibility? Ellis Kane Consulting can investigate and review your current supply chain for potential issues so they can be addressed and resolved in advance of them affecting your sales and ongoing viability.
 

4.  Process & Systems Optimisation
Are you and your teams bogged down with activities that take up a lot of time, but which deliver little or no benefit to your business? Ellis Kane Consulting can undertake rapid process reviews so that roles and responsibilities are clarified, and business processes clearly understood. Recommendations can then be made for efficiency and effectiveness improvements to key business functions, releasing time and energy for business teams to concentrate on forward-focused activities.


5.  New Product Launches
How effective have your new product launches been in the last 18 months? If they have been late or incomplete and missed key sales opportunities, Ellis Kane Consulting can ensure that all lessons learned are captured, assessed and mitigated to ensure that your business is ahead of your competition in future.
 

 

Contact

Thank you for your interest in Ellis Kane Consulting and our services, all of which can help to ensure that your business can recognise and adapt to future challenges. Send us an email with a brief outline of the challenges your business is facing and we will give you an overview of how we can help.