Massive clothing sales expected as stores struggle to sell stock during lockdown
Clothing stores might be forced to put their unsold items on sale, in a desperate bid to clear out their unwanted merchandise and generate funds.
While the retail outlets that the Saturday Star contacted this week declined to comment on the matter, investment analyst Chris Gilmour explained that they might have to resort to unprecedented measures to handle the unforeseen interruptions to their operations.
“In a normal situation, unsold stock would be marked down heavily in order to move it, even if that means selling at a loss,” he said.
“SA retailers are very loath to do this but they may have no choice.”
A report by the World Economic Forum (WEF) this week revealed that clothing sales fell by a whopping 89% in the US during April, compared to the same month last year - while UK retailers and fashion houses also saw a 50% decline during the same period.
This apparel has been piling up in stores, distribution centres, warehouses and even shipping containers - during months of Covid-19 lockdowns around the world, as measures to contain the spread of the deadly virus meant that retail outlets had to shut their doors indefinitely.
While most clothing stores in the country are now operational under level 3 of the lockdown, their closure has meant that much of the excess summer stock could not be sold.
While it is still unclear what steps local retailers will take to get rid of their surplus items, major brands - including Adidas - said they had stashed away unsold basics, with the aim to offer them to shoppers next year instead.
But experts believe this to be risky business, as the value of these kinds of items decrease over time.
As clothing retailers and fashion houses plan their seasonal offerings months in advance, this could also cause disruptive backlogs in the highly planned process.
But it’s not just unsold stock causing problems for clothing retailers.
Gilmour explained that no store can escape the financial implications of shutting their doors down for weeks on end, even if some of them have savings stashed away for unforeseen events.
“There is no way they can make up for the weeks they were not operational,” Gilmour explained.
“There will undoubtedly be retrenchments and store closures, and many will already have happened.”
Edcon Holdings Ltd are one of the retailers feeling the financial effects of the Covid-19 pandemic.
The country’s second-largest clothing retailer has this week proposed the sale of Edgars, Jet and Thank U Digital Services, in a desperate bid to keep it alive for the upcoming summer sales season.
The company said it had considered restructuring or the outright sale of the business, in an effort to rehabilitate Edcon, but opted for selling, as raising funding for the group had become difficult.
Gilmour explained that Edcon and several other clothing retailers’ financial problems might have been exacerbated by the coronavirus and subsequent lockdown measures to curb the spread of the deadly virus - but the local industry was already in trouble before that.
“If this had purely been a lockdown, with no associated job losses due to the recession, we could reasonably have expected a spike in terms of pent-up demand. “However, so many people will be losing their jobs and the government’s safety net hardly compensates at all.”
He added that the pandemic has also meant that an increasing number of workers have lost their jobs or are experiencing salary cuts and simply do not have spending power.
“If customers no longer have money, they won’t be able to spend, and so many of these retailers and manufacturers will go bust.”
While the rise in online shopping during the pandemic has allowed retailers to sell some merchandise while their physical stores were closed, Gilmour insists that these sales were not significant enough to keep the stores afloat.
“It has helped but online is still in its infancy in South Africa.”
Gilmour explained that in provinces like Gauteng, going to the mall to do shopping is an event and an outing for many people, particularly over the weekend, and that many of them do not have the resources to shop online.
“It helps people to cope with the dreariness of their lives in the dusty townships.
“To go online properly, one needs decent broadband and suppliers need proper logistics capability, something that is still far from developed in South Africa.”
But from struggle, comes creativity and opportunity to forge a new path, insists SA Fashion Week (SAFW) director Lucilla Booysen.
“We have not seen the post-Covid-19 designer collections but I suspect it will reflect the story of what they have become and what these experiences have meant. Fashion is about reflecting the design soul of not only the designer but of a country.”
She believes that now is the time to support locally made products, as it would also grow the local economy.
“We should focus on developing our very own designers.
“We should assist them in their growth so that they can build their businesses to where it should be, serving their communities and the consumers in South Africa.”
Gilmour agreed and added that the industry needs all the support it can get.
“Local clothing suppliers, those that survive, should be encouraged to produce much more for local consumption and if this requires much more investment in plant, equipment and training, so be it.
“The government should step up to the plate and help provide assistance for this, in whatever shape or form is required.”