The COVID-19 weekly report #4

Key Takeaways

• Share of lockdown period’s stock is still relatively lower compared to winter and transitional stock. The impact on the brands will be relatively less significant than earlier expected.
• There is a visibly lower peak of summer garments, in terms of incomings, than last year. Does it mean that the retailers are going to shift those articles to 2021 or is the peak yet to come?
• Flat evolution in terms of the average discount rate. The two teams are getting more and more distinct with Zara and Mango continuing their increase in the number of discounted articles.

Stores can open but, due to the health and safety measures, traffic is expected to be terribly low, and the conversion will need to be strong. Some retailers have opted for availability on appointment only, such as Zara  in Spain. While others, such as H&M have temporarily closed all fitting rooms as a safety measure.

According to Business of Fashion and McKinsey state of Fashion Covid-19 update evidence from China suggests that consumers are increasingly embracing digital solutions for shopping. How are brands going to work on their Omni-channel’s solutions? What about sales preparations? How are brands going to discount and what are they going to discount?

Aging of the stock

When it comes to week 20, the aging of the most challenging stock, i.e. 0-60 days, has continued to decrease compared to the last two weeks. Combined with a lower volume of new arrivals compared to the previous year, this KPI shows us that retailers have taken actions to minimize the Spring/Summer collection as much as possible.

The week was not a week of high discounts, as retailers continued to put selected articles on discounts, instead of operating flash deals and/or flat deals on specific categories like Mango did in week 18-19.

At Retviews, we manage to get the aging of the stock based on the day the article is first posted online, which represents its launch. On your Retviews’s interface, you can exclude the out-of-stock and therefore update the data of your best-selling products or running items.

New arrivals: a decreased trend?

As presented in our Webinar on 12th May, the big winner of the confinement is the nightwear and underwear category. It is also among the most represented categories in the new arrivals. Despite the possibility of going back to the office, governments have advised that work-from-home is still favorable. Hence, this category will undoubtedly thrive in the coming weeks as well. New t-shirts and shorts are also arriving online with a clear focus on seasonality.

On top of that, summer garments are coming in with a clear focus on kids as accessories and clothing sets have been part of the top new arrivals categories.

As mentioned above, we have also observed that retailers have adjusted their volume of summer articles compared to last year. In the graph hereunder, It can be observed that the evolution of swimwear, accessories sets (which are kids summer accessories and swimwear), and shorts have clearly declined, and the usual summer peak of incomings is way lower than 2019. Therefore, a question can be raised: when is going to be the actual peak of high summer garments? Does this mean that retailers have decided to keep a majority of their summer collection for 2021, or is the peak yet to come?

Share of discounted articles

When we compare the situation in the markets we have analyzed, the division between brands is still highly visible which has been the case since the beginning of lockdown.

Even though the Hispanic brands’ shares are still lower than the others, Mango has had an increase of 87% compared to the beginning of the lockdown, and for Zara, it is at 67%. While H&M, C&A and Uniqlo have all decreased their share by 30% on average.

When analyzing the share of discounted articles, it is essential also to analyze the discount rate evolution. The latter has not fluctuated much since the beginning of the lockdown or phase 1, and is on average equal to 42%, with H&M and C&M reaching the highest average discount rate of almost 50%.

However, a higher share of discounted articles, even with a flat evolution of the discount rate, represents a higher cost reduction for retailers.

Discounted categories

As mentioned earlier, week 20 was not a week of high discounts. This is probably because the retailers were reopening their stores and therefore did not want to offer any extra discounts on the opening. This can also be explained by the retailers needing to cater for other costs such as extra working hours for the staff in stores who are busy with implementing all the new health and safety measures before opening.

Compared to last week, the categories tackled by retailers are much more seasonal with the number one discounted category being t-shirts. Kids are also tackled this week in anticipation of schools reopening soon in the analyzed markets.

Conclusion

Retailers have taken many actions during the whole confinement that have led them to the current, quite positive, situation. The share of the challenging stock, which we have named “Covid-19 stock”, is relatively low for almost all retailers analyzed. The silver lining is that the costs of the pandemic might not be as catastrophic as we first thought.

Still, a question remains, if the peak of summer garments arrival is that low, can we expect another wave of new arrivals?