COVID-19: Disruption to fashion industry & supply chain

Back to Textile & Garment Sector – webinar series

The COVID-19 pandemic has brought significant challenges to the global fashion industry. HSBC hosted the first of the Textile and Garment Sector webinar series in June to provide insights on how the industry can adapt and navigate through these challenges and complex uncertainties.

How COVID-19 is disrupting the fashion industry and global supply chain

18 Jun 2020

Economist: Frederic Neumann, Co-Head of Asian Economics Research, HSBC

Panel speakers:

Dr Henry Tan, Chairman, Textile Council of Hong Kong
Ajay Sharma, Regional Head of Global Trade and Receivables Finance, Asia Pacific, HSBC
[Facilitator]: Alan Ho, Senior Communications Manager, Communications, Asia Pacific, HSBC

The fashion industry has felt the brunt of the impact of COVID-19, reeling from disruption to existing supply chains and a drop in demand. Understanding these effects and their implications for the industry will be crucial for companies to prepare for the future.

Key takeaways from Frederic Neumann, Co-Head of Asian Economics Research, HSBC, on the conditions facing the textile & garment sector from viewpoint:

  • With lockdown measures being lifted in key markets around the world, apparel sales have seen a strong and immediate rebound. Although this was expected due to pent-up demand, Frederic indicated that over the longer-term the pace of recovery will slow, with global GDP estimated to remain below pre-COVID levels throughout 2020-2021.
  • Asia is positioned to lead the recovery, due to comparatively low rates of infection and greater resilience against secondary flare-ups.
  • China will drive much of Asia’s re-emergence from COVID-19, with consumer confidence on the rise due to stimulus measures targeting the property and infrastructure sectors increasing employment and spending.

Key insights from the panel discussion with Dr Henry Tan, Chairman, Textile Council of Hong Kong and Ajay Sharma, Regional Head of Global Trade and Receivables Finance, Asia Pacific, HSBC, on how the fashion industry are responding and the trends shaping the future of the industry:

  • Many companies are facing liquidity crunches due to cancelled orders and slowdowns in production. This is driving demand for trade financing to meet working capital requirements and remain operational.
  • Risk mitigation is back on the agenda after a long hiatus. We will likely see more letters of credit and requests for banks to intermediate.
  • Despite a general decline in demand for apparel, some segments are faring better than others. Basic clothing is seeing growth, while higher-end items are struggling due to rising unemployment in markets like the US causing a drop in discretionary income.
  • E-commerce is providing better transparency to sales and inventory. This will drive innovations to make delivery faster and the creation of shorter supply chains.
  • The adverse impact on global supply chains is giving momentum to free trade agreements like the proposed Regional Comprehensive Economic Partnership, seen as important for strengthening commerce and interdependence in Asia Pacific.
  • The digitisation of trade is also a priority, making technologies like blockchain necessary for increasing transparency between buyers and sellers.

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