The COVID-19 Retviews report #5

Key takeaways

• Two teams have been highlighted since the beginning of the crisis. This trend has been observed all along the lockdown period but is also a yearly trend. H&M has reduced its number of articles in promotion compared to last year, while Zara has done the opposite. However, the number one retailer in the world still has a lower share of discounted articles compared to the Swedish mogul.
   
• Retailers that have increased their number of discounted articles have done it with a lower average discount rate than last year . Is this proof that strategies like Black Friday are the ones that payout the most?
   
• Prices on average have increased for H&M and Mango, while for Zara and Uniqlo, a decrease can be observed. Is it due to an alignment of prices or a strategy to win as much margin as possible?

The coronavirus pandemic is the only word we have had in mind since the beginning of the year. It has been a hell of a roller coaster ride for half-year 2020.
Now that stores have reopened and brick and mortar have (almost) started to get back to business as usual, it is time to compare the outcome of this crisis to last year during the same period. This will allow us to get an overview of how the pandemic has impacted the industry.
Like the previous reports, we have analyzed the European markets by mainly focusing on the big players and the most important markets for the brands in terms of sales net: Germany, France, Spain, and Italy.

Aging of the stock: the share of challenging stock

Compared to week 19, week 20 and 21 have experienced lower numbers of new articles’ arrivals.
Through the Aging of the stock, we can see the retailers that opted against the increase of discount as a strategy are experiencing an increase in the 0-60 days bracket.
For instance, in the case of C&A and H&M, they have decided to decrease the number of discounted articles since the beginning of the pandemic and lockdowns in Europe.

Overall, the situation seems to be healthy as the 0-60 days bracket represents the articles that we have named the COVID-stock. It includes articles that have been launched during the lockdown and have had little or no exposure in stores. On your Retviews interface, you can narrow down the bracket up to the 0-30 days, and see the share of the summer categories in order to weigh the impact the aftermath will have on your sales.
Besides, when it is compared to the beginning of the crisis, we can observe that retailers have tried their best to reduce this share as much as possible, that represents summer and high spring garments, which will probably be reduced during the summer sales.

New arrivals: Summer garments

While week 20 was more focused on the Kidswear, week 21 has shifted its focus on summer garments. The categories with the highest incomings were primarily Accessories, T-shirts, Dresses, followed by Swimwear and Shorts. Even if the volumes were low compared to last year as described in last week’s report, it shows that retailers still want to showcase and sell their summer collection despite the situation.

As you are reading this report, we will get to June, and high summer garments will be all around the e-commerce and in-store.
Whether this collection will sell or not, only time will tell us.

Share of discounted articles: a yearly trend?

We have seen the past few weeks in our reports that there are two distinct teams in terms of their discounting strategy. This week again, Mango and Zara have increased their number of discounted articles.

What might interest you is that this trend is not just a trend observable due to this crisis. When we compared week 21 this year with last year’s week 21, the evolution of the trend is even more visible. The Spanish brands analyzed in this report show that as highly relying on fashion trends, they have been forced to discount more than they did historically.

However, despite the apparent increase, those brands still have a lower share of discounted articles compared to the ones that have decreased their number of marked down articles like H&M and C&A.

Average discount rate: has it evolved?

When it comes to the average discount, the trend that we have observed is opposite to the share of discounted articles’ trend.
While H&M and Uniqlo have managed to reduce their number of discounted articles, the ones that they have put in markdown are at a higher average discount rate compared to the previous year. This increase in the average discount is more than 40% as compared to last year.
On the other hand, Mango and Zara may have put more articles in promotion, but they have done it at a lower average discount.

What we can get out of this observation is that like the Black Friday, more articles at a lower discount rate action seems to appeal to the customers. The weekly renewal of discounted articles provides customers with an incentive to keep checking the websites regularly and to buy more.

Average price evolution

Now that we have reached the aftermath of the full lockdown and that the summer collection is starting to hit not only the online stores but the physical stores as well, it is good to have a look at the pricing evolution.
Mango, which is historically at a higher price point on average than Zara and H&M, has actually kept on increasing its average price by 20% when compared to week 20 of 2019.
The Swedish giant has done the same while the number one retailer in the world has, on the other hand, decreased its average price slightly.

Was it done to reach a price alignment or to get as much margin as possible on the articles that were launched and available? It would be interesting to summarize this information once half-year 2020 will be over.

Bottom line

The fashion industry has suffered greatly from this crisis and continues to do so. The best way to get out of this recession is to work on the future and the best assortment to get while continuously keeping an eye on what customers are looking for.

Discounts frenzy did not massively happen in the mass market, but it is visible that the pandemic has changed the competitive landscape. Brands that historically do not discount outside the sales period are the ones that have massively increased their level of discounted articles. On the bright side, they are also the ones that managed to decrease their average discount rate compared to last year. This is the silver lining and maybe a good hint for retailers that are looking for the right markdown mix: more frequent additional articles, in small quantities, with a relatively low average discount.
The aftermath of the pandemic for the fashion industry has just started. Let us see what the summer sales will look like.