The COVID-19 weekly report #3

Germany is already in the second phase of the pandemic but do not seem to be in the same phase as the Chinese either. 

Therefore, can we expect a surge in sales in the European fashion industry as well?

What are the actions retailers have taken in week 19, and are they going to help them begin this lockdown lift effectively?

Aging of the stock

The aging of the stock is a good KPI to know the composition of one’s stock. This data shows for how long an article has been posted on the retailers’ websites and, therefore, provides us with a good view of the weight of the Spring and partial Summer collection right now.

Compared to last week’s results, it can be observed that, apart from C&A, another clear shift can be seen between the 0-60 days and 60-120 days buckets.

With Retviews market data, we have observed a decrease in terms of new arrivals for all the brands except for the German brand C&A. Therefore, combined with the retailers’ spring collections’ markdown, these actions have helped them in reducing their level of COVID-19 impacted stock.

New-ins : Germany vs FR

Germany got out of the lockdown on April 20th, while for France and the other European markets covered in our analysis, the lockdown will just have been lifted as you read this report.

There has been a question surrounding Germany’s early lockdown lift and its impact on the new arrivals.  The data hereunder shows that it, indeed, did impact the companies’ decision.

Some retailers, such as Zara, were consistent and did not adjust their collection according to the market. For instance, the Spanish brand launched all its articles at the same time, without any discrimination. Why did Zara not take advantage of the early opening of the German stores? That is an interesting question. 

On the other hand, retailers like H&M and Mango did adjust their incomings but in a completely different manner.

We can observe that H&M adjusted its new arrivals with the new orange and earth-toned collection, which landed on its German website almost a week earlier than France. This is aligned with the timing of the lockdown lift. Moreover, the week after the lift, Germany has received 50 new refcos  than France.

Our assumption is that H&M has utilized the end of Germany’s lockdown as leverage to already showcase the new collection and be aligned from an Omni perspective, as stores were opened. Therefore, the main idea would have been to boost sales as much as possible.

On the other hand, Mango did the exact opposite, the brand increased its number of articles in France rather than Germany.

Two trends in terms of discounted articles

It is noteworthy to mention that the share of discounts computed by Retviews represents the proportion of articles that are marked down among the retailers’ whole assortment. The share of discounts is not computed the way retailers do. However, it is still an important variable to keep in mind and to follow up, as it is what the customers perceive.

Like last week, there are still clear differences between the two teams. The Hispanic brands have continued to increase their number of marked down articles. While H&M, C&A, and Uniqlo have reduced their share even further.

New discounted categories

Compared to last week, the reduced articles are more seasonal ones. According to Retviews data, Dresses are not just on the podium this week, they have even got the gold medal in the discounted category. Followed by Outerwear, which were mainly transitional ones that could be worn now, and T-shirts get the third spot.

As seasonal garments were tackled last week, which resulted in a reduction of aging stock in the 0-60 days, we can assume that those markdowns might have helped the retailers to clean their Spring/Summer collection.

Whether the article selection is based on speed and stock turnover or purely based on tackling strategic garments (highly seasonal as explained in the previous reports), this is a trade-off only merchandisers can make. In our case, and knowing the current situation, we are assuming that the decision is mainly oriented towards the strategic articles that need to be cleaned.

The bottom line

Some retailers, such as H&M have already adjusted their strategy to better suit each market, they have also focused on reducing their costs  as much as possible before the fateful sales period. While, others like Zara and Mango, did not follow suit and continued to increase the number of marked down articles.

The categories of garments discounted this week have seen a shift towards a more seasonal type of articles. It shows that brands have started to precisely tackle the most challenging stocks.

The lockdown is probably lifted in all European countries as you are reading this report. Stores are starting to get back to business almost like it used to be before COVID-19.  This raises a few questions: how are the retailers going to present their products in stores? What is going to be the store stock situation? Are we heading towards a “revenge spending” phase like China is going through now, as explained by Heuritech? Wait and see.