Whilst the retail sector is baffled by the Covid-19 pandemic, online fashion retailers’ boom

• Online apparel & accessories retailers flourish despite the pandemic
• The road ahead

The spread of the Covid-19 virus has seen varied sectors across several economies practically come to a halt. While governments globally have had to enforce shutdowns in an attempt to contain the spread, the slow-down in retail activity has only battered their economies. Globally, and specifically in the US and Europe, apparel retailers has been one of the hardest hit categories during the ongoing pandemic. For instance, sales at clothing & accessories stores in the US were down by 62.4% YOY in May 2020 while the same were down by 50.5% for the Euro zone.

Given the widespread job losses and pay-cuts, while many have had to curb discretionary spends, those who would still want to shop have only found most non-essential stores shut. Here is where the online retailers have stepped in, ensuring the customers desire for new clothes is satisfied. While the typical brick & mortar store retailers found themselves unable to trade due to mandatory shutting of their stores, several online fashion retailers have prospered during this time.  For example, in its recent guidance issued on July 15^th, a leading online fashion & lifestyle retailer- Zalando has indicated it expects its Q2 GMV growth (Gross Merchandise Sales) at 32-34%, whilst revenue growth expectations at 26-28%. This uptick is primarily accredited to more consumers shopping digitally; in fact, to its credit Zalando has registered a customer growth of more than 3 mn customers in Q2 2020 alone. Zalando also boasts of 180 new partners having signed up to the partner program in the said quarter.  The Company now further expects GMV growth of 20-25% along with a revenue growth pegged at around 15-20% for FY 2021. Zalando isn’t an exception to the booming sales. Another company, ASOS- a UK based online fashion retailer recently revealed its sales rose by 10% for the 4-month period ending 30^th June 2020, again having benefited from the temporary closure of its rival stores while the Company operated digitally throughout the Covid-19 pandemic.

A resale retailer, Vestiaire Collective SA, offering its online community a platform to sale and purchase used luxury items has indicated a jump of 119% YOY in May this year while another online fast-fashion retailer – Boohoo Group Plc reported a 45% increase in sales (£367.8 mn) for the three months to 31^st May. Although Inditex (owner of brands such as Zara, Berkha, Pull&Bear, Stradivarius, Massimo Dutti amongst others) reported a ~44% YOY drop in revenues in Q1 2020 but witnessed strong progression of online sales along with a 95% jump in online sales in April. In fact, to this very effect, Zara is said to close up to ~1,200 stores globally, whilst concentrating all its effort into boosting online sales. Similarly, globally the second biggest fashion retailer - H&M reported almost a 57% drop in local currency sales for the period 1^st May- 6^th May while seeing its online sales grow by close to a third. In its biggest market- Germany, the lockdown has gradually been lifted in the past couple of weeks, however H&M reported a decline in sales of ~46% in Q2, with trade being muted in spite of non-essential stores opening up. As per a survey by KPMG, more than half of Germans surveyed said they haven’t gone out shopping in spite of retail stores opening to minimize the risk.

Clearly, most online fashion retailers, have come out of the pandemic unscathed in comparison to their peers who typically depend upon stores sales to maximize their revenue. With its digital platform growing by the day, Zalando has in fact rolled out a partner support program in order to benefit various designers, retailers and fashion brands that have suffered from the effect of Covid-19 crisis, the program helps clear overstock, increase liquidity, as well as launch and/or expand Direct-to-Consumer business. As part of the program, Zalando says it will push the onsite visibility worth € 5 mn via its ‘Zalando marketing services’ until the end of the year, thereby helping smaller brands to display their creations in front of millions of customers. Sherri Malek, an analyst with RBC Capital Markets’, said that Zalando managing to add 39% more of new customers in April 2020 alone was "evidence of the accelerated consumer shift from offline to online". The behavioural changes that the pandemic has brought about is likely to only further accelerate digital purchase of clothes & accessories. In addition, similar to Zara’s example stated above, more and more retailers will now be pushed to enhance their online operations and build up their digital operations.