What should the fashion industry do during a period of decline in consumption? This and many other issues were discussed at the All-Russian industry conference “Fashion Retail in the context of an economic downturn. Indicators. Strategies. Technologies ”, which took place at the Higher School of Economics and was organized by Fashion Consulting Group. The results of the discussion were summarized by Anna Komissarova.
Describing the current situation in the fashion market, Anna Lebsak-Kleimans, director of Fashion Consulting Group, concluded that "the companies froze in a state of quiet horror." The global financial crisis threatens to cross out the high growth rates of the clothing market over the past seven years. As explained by Lebsak-Kleimans, the peak of growth occurred in the 2004-2006 years and reached about 17-20% per year. In 2008, the forecasted growth was to be 13-15%, but by the end of the year it had almost halved. According to Maria Smorchkova, CEO of APRIM, “if in the beginning of autumn negative trends appeared, first of all, in the problem of lending to retail companies, then by the New Year the next stage was outlined - decline in consumption and drop in sales in the retail market”. In such a situation, “small, slow and weak” suffer most, Lebsak-Kleimans believes, referring to completely new companies, old retailers that have not reached stable performance, as well as large companies that are in the process of re-lending. According to Sergey Grachev, Corporate Project Director for Nestle Group of Companies in Russia, the main stress during the crisis is associated with a change in the business environment. Retailers are changing suppliers, competitors and customers, while the company's mission remains constant.
The secret becomes clear
Many Russian enterprises in the fashion industry have also encountered old hidden sores within the company. “In many cases, the economic downturn has become a catalyst for internal problems in companies. These problems existed before the crisis, since extensive development inevitably leads to the so-called "growth disease".
For previous successes, the companies did not notice how, during the work, they transferred the wholesale work scheme to retail, lengthened the periods for reaching operating profit, delayed the return of debts, overestimated the rate of return on investments, did not clearly distribute duties and levels of responsibility between employees, which led to excessive organizational structures, duplication of functions, inflating staff. Now, when the changed conditions require efficiency and clarity in work, with the naked eye, all the imperfections of the previous business system have become visible.
Accordingly, all companies need to quickly review their development plans, determine what the key potential of their company is, and set new priorities in business strategy, ”says Lebsak-Kleimans.
Sergei Grachev softened the pessimistic view of many experts on the current situation by presenting research data, during which it was found that retailers do not hang up under the onslaught of the crisis. It turned out that 85% of companies are striving to use the crisis for development. At the same time, 47% see ways to use the crisis, but so far they have not been prescribed in detail.
According to representatives of retail operators, there really is no big panic. “The crisis is in my head,” laughed Arkady Pekarevsky, vice president of the international corporation SELA, stressing that the SELA network does not plan to abruptly curtail projects and cut staff on a large scale. He noted that at the moment, the main thing is a thorough audit of existing business processes, a constant operational analysis of financial indicators. “Staff cuts are the twenty-first on the list of what needs to be cut. And only those shops that have been unprofitable for several years need to be closed, ”says Arkady Pekarevsky.
Gary Bashour, senior vice president of finance (CFO) Gloria Jeans, also agreed with him. The company is not going to significantly reduce the number of stores and staff. At the same time, business performance indicators for each individual retail store are now more thoroughly analyzed, and the bonus system is being reviewed from the point of view of personnel management. According to Gary Bashur, the key to efficiency is the correct distribution of efforts. For the vertically integrated company Gloria Jeans at this stage, the fundamental change in optimizing business processes was a clear division of the company into production and retail projects.
Andrei Burmatikov, director of the consulting department at Fashion Consulting Group, shared his experience in adjusting the assortment strategy. According to him, the collection work cycle can be successfully optimized by outsourcing a number of design and merchandising functions. He noted that “design should be outsourced if there is a merchandiser who regulates the assortment matrix, since design and fashion are two different things.”
The only thing that really worries retailers is the lack of good sellers, because in conditions of economic force majeure, the key to success is to increase sales in stores and customer loyalty. They were joined by Elena Filyakova, project manager at SQI Management, the Step consulting center: “Impulsive purchases can even be in a crisis situation. Investing in quality of service can give high returns and the opportunity to win in today's difficult situation, ”she added and noted that a separate problem is the lack of clear service standards and a system for assessing its quality. Today, managers are trying to improve the situation by changing the system of motivation for sellers, introducing bonus pay instead of a fixed one. It is hoped that the crisis will have a beneficial effect on the quality of Russian service.
In order to return the work back to normal as soon as possible, experts advise to decide on its purpose: during the crisis, you want to squeeze the business as much as possible or, actively absorbing weakening competitors, expand it. In any case, you will need to get rid of the least profitable or unprofitable brands in the portfolio and concentrate on promoting the most successful.
The next measure of first aid for business can be a change in the range. As Maria Smorchkova noted, in a crisis, people change their views on clothes. They begin to appreciate more money on hand and seek first of all to purchase high-quality, so-called "eternal" things, reducing the total amount of purchases. In the III quarter of 2008, the total volume of purchases decreased by 15%. In this regard, buyers should get rid of models that can turn into illiquid leftovers. The riskiest part is the display group of products, which creates an image and attracts customers, but sells the worst. The approach to strategic planning in response to the crisis also needs adjustment. According to Anna Lebsak-Kleimans, the current situation forces a change in the nature of management. If earlier management was based on the principles of long-term planning, which took into account feedback in the form of reactions from consumers, now it is time for professional adventurism. You will have to act almost blindly, since there is no time to wait and analyze consumer reactions - decisions must be made here and now. (Read more in the article "Seven Ways to Survive the Crisis").
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