In a Ragtrader first, we have made our lead story for our April edition available to readers as they navigate what is a challenging time. Imogen Bailey reports on how Australian retailers are coping with COVID-19.
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The butterfly effect is the idea that small things can have an impact on broader, complex systems.
And in December 2019, a butterfly flapped its wings in Wuhan, China.
By March 11, that single movement ricocheted to create what the World Health Organisation has dubbed a pandemic.
COVID-19.
Industries across the globe have seen manufacturing come to a grinding halt as travel restrictions, health concerns and containment wreak unprecedented disruption.
The measures – some of which are still in place – have impacted the Australian fashion industry, which relies on China to produce a large proportion of its garments and footwear.
Tony Bianco is one of many.
Tony Bianco director Anthony Bianco says that the delay in production means that winter stock will arrive late.
“The biggest thing is the time factor now. Everyone normally gets their winter deliveries in February-March as our key season.
“Luckily enough we had a lot of winter deliveries pre-Chinese New Year.
“But winter you’ll find will be massively delayed I’d imagine for a lot of people who won’t have winter product.
“If they’re [factories] not back until mid-March you’re talking late April delivery so you could see a lot less winter product on the shelves.
“We all get our winter deliveries in early to get a read through February and March and repeat April, May and June when it’s cold,” he says.
To combat this delay, Bianco suggests that many companies look to air freight stock in, despite it being costly for business.
“It’s going to impact massively in terms of deliveries, businesses will probably have to air freight stuff which costs a lot, so then that puts pressure on margins.
“It’s just a snowball effect. It’s unknown. When the factories come back – how will they come back? Will they be at full capacity? A factory might come back and they might have 500 workers but 100 of them might be from that district and can’t get back.
“Therefore, production will be lower which impacts deliveries.
“We will definitely air freight shoes once the factories come back just to make sure that we’ve got the styles that we had in our campaign that were going to be late. We’ll air freight quantities of those.” he says.
Mosaic Brands CEO Scott Evans says that the business will also consider air freighting stock to meet demand in Australia.
“We've got a bunch of priority items that we will air freight if we need to but having said that you can't air freight items at the moment anyway.
“The stock that was supposed to arrive early February was delayed anywhere between two and three weeks due to Chinese New Year being extended and the quarantine on shipment here.
“In most factories everything that we would receive in February and March was made before Chinese New Year so those garments are made and ready to ship.
“Obviously February is now done so those garments are just going experience a delay in shipping whether that be two or three weeks, we will get them,” he says.
Despite the costs associated with air freighting, Evans says the bigger concern for the Group is garments not yet made and how long these might take to be produced.
“The bigger piece which is what we're nervous about – and I say nervous because we just don't know so we don't know whether to be nervous or not – is that the product that is due for April and May, which is important for us because that's Mother’s Day and a lot of it is obviously winter facing product, those are the collections that aren't yet made.
“They were not made before Chinese New Year. The impact there is not just shipping the impact is, ‘how quickly will the factories, the mills and everybody get back to normal and start to produce that stuff?’”
Bianco adds that these delays also have a wider knock-on effect to wholesale business.
“We’ve got our wholesale accounts who depend on us for deliveries.
“I’m just talking about us: we deal with The Iconic, David Jones, Myer. They depend on us for deliveries and deliveries are going to be late.
“You can’t not have shoes,” he says.
Witchery MD Simon Schofield agrees the greatest challenge on the production front is certainty.
“We’re hugely sympathetic to those who have been affected and we’re working closely with our suppliers through our supply team and our production team to manage that.
“We’re very fortunate that we have long-standing relationships with our suppliers – we’ve been working with them for many years so it does stand us in very good stead.
“But we’re just waiting on information as it comes through day by day – we still have whole areas of China where they’re still not open, where they haven’t returned to work.
“Getting that information out is just taking time as they come back to work, as they assess how much has come back and therefore what impact that might have from a delivery perspective and how we negotiate that.
“We’re really monitoring that and working as closely as we can to manage the impact and we obviously have tactics in place if we need to,” he says.
For Mosaic Brands, the business is considering its sourcing policy and will further assess it as time goes on Evans says.
“We have a real solid sourcing policy where always looking at where we should and should not manufacture.
“The coronavirus has very much come from left of field; are we panicking and overreacting? I don't think so. I think we're considered about it and the true extent of it will unfold as time progresses, but we have a real solid sourcing policy that we will stick to.
“But of course, we will adjust that accordingly but we're not not going to make in China moving forward,” he says.
For Tony Bianco, the plan is to remain positive and diligent about stock decisions Bianco says.
“We’re very lucky that we had plenty of winter boots delivered pre-CNY so we’re right until through to April.
“Our plans are so many plans – we’re trying to plan as much as we can.
"We’ve got a bit of production out of India, a bit out of Vietnam but this just highlights the risks of the business that we all do. Maybe you’ve got to spread your business a bit more in future.
“I’m thinking positive – if they get back, we’ll obviously have to be careful about the back orders of winter – repeats will be tighter.
“The positives hopefully will be that because there’s less stock in the market, hopefully less discounting, the big sales won’t be there because they can’t afford to clear too much stock because they’re waiting on more stock.
“A positive could also a drop of winter product in winter, so it’s seasonal,” he says.