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For the fashion industry, the fallout from the coronavirus may be just beginning

“We’re all seeing what happens when you place all your eggs in one basket.”

For the fashion industry, the fallout from the coronavirus may be just beginning
A guest at Milan Fashion Week on February 23, 2020. [Photo: Edward Berthelot/Getty Images]

It was an eery sight: On Monday, Giorgio Armani held its Milan Fashion Week show in a vacant theater, and at the end, Mr. Armani himself took a bow in front of rows of empty seats. The night before the show, it had become clear that coronavirus had hit Italy hard, with hundreds of new cases confirmed. As a result, the fashion house thought it would be safer to proceed without an audience, but to livestream the show instead. The models strutted around the cavernous room dressed in festive pink and teal Armani Privé gowns, even though the mood was anything but celebratory.

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The coronavirus is spreading rapidly, and economists now fear that it will have a major impact on the global economy. In the fashion and design industries, we’re seeing an immediate impact as annual events are cancelled in Europe and Asia. Besides fashion shows, Milan-based Salone del Mobile and MIDO, the biggest furniture and eyewear fairs, have both been postponed from the spring until June. Shanghai Fashion Week and the Barcelona-based Mobile World Congress have both been cancelled.

But while these events draw huge crowds and allow buyers to see the latest products on the market, they only scratch the surface of the problem. China, where the virus originated, is a major manufacturing hub for many industries, including fashion. It currently manufactures more than a third of all clothing and textiles globally, although its market share in apparel manufacturing has declined slightly over the past few years. And fashion brands across the spectrum manufacture their products in China, from luxury labels like Prada and Armani to fast-fashion brands like H&M and Zara. The problem is that factories around China are still shuttered, and it’s unclear when they will be up and running again. This means that all fashion brands that source from China are going to see major delays in getting their inventory over the next few months.

Designer Thakoon Panichgul, for instance, says he’s already heard from factories that his summer collections will be about a month late. Many other fashion brands are seeing delays of anywhere between 25 to 45 days, says Aaron Luo, cofounder of Terracotta Partners, a company that helps fashion brands build supply chains in China. (Luo is also the cofounder of a luxury accessories brand Caraa, which also manufactures in China.) But since we don’t know exactly how bad the crisis is going to get, there’s the possibility that the factories will need to take even longer to turn orders around. “Summer collections will be slightly delayed, but when it comes to fall, it’s less clear what will happen,” Luo says. “The fashion supply chain is very complicated, and many parts have been affected by this process.”

What exactly is causing the delays? For one thing, Luo says that many factory workers went home for the Chinese New Year holiday, which occurred right as the outbreak was spreading. Many are having a lot of trouble getting back to their factories because their cities are under lockdown and public transportation has ground to a halt. The government has also put the factories themselves through extensive inspections, and workers are being subjected to tests. “Many apparel and accessories factories are far away from Hubei,” Luo says, referring to the province that is the epicenter of the outbreak in China. “But factories across the country, even far away from Wuhan, are being affected by this.”

Right now, these cut-and-sew factories are just trying to ensure that workers are able to get orders out. But when it comes to fall and winter collections, these factories need to work with other factories that produce the actual materials that go into clothes and accessories. And with so many parts of the supply chain disrupted, it’s hard to tell how long it will take for things to get up and running again. “We have buttons coming from one factory in one part of the country and zippers coming from another,” Luo explains. “If several parts of the process is delayed, everything slows down.”

This means that that collections slated for later in the year are more at risk of getting delayed, which could affect things like holiday sales. And this uncertainty is even more problematic for brands that work with retailers because they’re under contract to deliver inventory by a particular date. Panichgul, for instance, used to sell his creations through high-end department stores, but now sells products direct to consumer on his website. He says this is an advantage at a time like this. “We drop new products throughout the year,” he says. “But we’re in complete control about when we do it. So we can delay a drop if we know it’s coming in late, and it won’t change anything for our customers.”

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The bigger question now is whether some brands will pull out of China altogether because of the severity of this crisis. Luo is not recommending that his clients do this because it takes a long time to find a factory partner that will do a good job and prioritize your brand. Moreover, moving production to another part of Asia or Europe takes time and would not actually ensure that fall orders are delivered more quickly. But this crisis is prompting Panichgul to rethink his supply chain. While he realizes he can’t prevent the current delays, he thinks it might be a good strategy to make products in several countries, rather than just one. “We’re all seeing what happens when you place all your eggs in one basket,” he says.

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About the author

Elizabeth Segran, Ph.D., is a staff writer at Fast Company. She lives in Cambridge, Massachusetts

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