The fashion industry is going through difficult times. Many companies have already gone bankrupt. And that’s not just because of frugal consumers.
In Paris, the latest fashion creations from designers are shining and glittering on the catwalk again – it’s “Fashion Week”. But the mood for sparkling wine is likely to be limited, especially among luxury labels, as they are struggling with lower demand in their most important sales market, China.
However, not only the upper segment, but the entire industry has problems: inflation, the aftereffects of disrupted supply chains during the corona pandemic, more expensive raw materials and the boom in online retailers. Many companies have no longer been able to handle this and are already insolvent: such as Esprit, Peek & Cloppenburg, Scotch & Soda, Gerry Weber, Hallhuber, to name a few.
An industry in “multi-crisis”
The fashion industry is in a “multi-crisis”, according to the analysis by experts at the Institute for Retail Research, IFH Cologne. In the Economy update on tagesschau24 says expert Kai Hudetz: “And now, triggered by the war of aggression against Ukraine, we have a really persistent lull in consumption. Consumers are unsettled. Half of the consumers we surveyed say they are afraid that their standard of living will not be maintained can.”
This plays into the hands of providers of extremely cheap “ultra fast fashion” fashion – and they are stealing customers and market share from stationary retailers. Wish, Temu, Shein produce cheaply and eliminate the middleman. The price war is extreme. But not just from low-cost providers, such as those from China. Most of the clothing sold in Germany comes from China and Bangladesh.
More security – but not more pay
Gisela Burckhardt from Femnet is particularly committed to improving working conditions there and in India. Since the tragedy in 2013, when the Rana Plaza textile factory in Bangladesh collapsed, safety conditions have improved, says Burckhardt. But not much has changed in terms of working conditions and wages.
“The starvation wage still exists. It was recently increased from around 80 euros to 105 euros. But even with 105 euros you can’t survive in Bangladesh.” Especially since the inflation rate there is much higher than here. It is currently around ten percent in Bangladesh.
Even well-known brands produce cheaply under poor conditions, but sell their goods at significantly higher prices. “They’re expensive, not because they have better working conditions. Unfortunately, the workers don’t benefit from it at all,” says Gisela Burckhardt. “The products are only more expensive because marketing is expensive – and that’s reflected in the price. And the profit margins are also higher.”
Sustainability is important – price is more important
However, there is also a slow rethinking in parts of the industry. Several retailers recently announced that they would move their production away from Asia. Basically, says retail researcher Kai Hudetz, sustainability is firmly anchored among consumers: “74 percent say sustainability is important to me, but currently the price is more important to me.”
This gap is being filled by ultra-cheap providers. Specifically, this means that online providers such as Temu, Wish or Shein allow many people to buy more products that they would otherwise not be able to afford.
“Gamification” entices people to buy
A lot of work is done on their websites with so-called gamification – wheels of fortune and coupons can entice people to buy more quickly. And this is particularly popular with young people, 18 to 29 year olds. “Combining entertainment with very, very affordable prices is a clear success factor from which these platforms benefit.”
However, consumers often fear that they will be manipulated by such gaming mechanisms on the websites. It’s clear to many people what’s going on there – the low-cost providers do poorly in terms of quality and, above all, trust.