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Apparel industry will bounce back in 2021

It’s no secret that the COVID-19 pandemic has changed the face of apparel retail in a myriad of ways. As 2020 draws to a close, many retailers are wondering what to expect moving forward. What will happen to the apparel industry in 2021? Which COVID-induced changes will stick? And what will it take to succeed?

A 2021 outlook report from Moody’s Investors Service aims to answer many of these questions. The bottom line is, the apparel industry is going to make a comeback, but it won’t all be smooth sailing. Trends in apparel and accessories continue to point to a recovery. Tiffany & Co. released positive preliminary August and September results last week, with preliminary net sales down slightly QTD, as the US sequentially improved and mainland China remained strong.

COVID-19 Changed the Face of Retail

COVID-19 affected the apparel industry in many ways this year. As consumers stayed at home for months on end, casualization became more popular, with sales of work and formal attire declining as customers chose yoga pants and athleisure wear instead. Online sales also soared in popularity: on average, people are spending 10 to 30 percent more online. Healthy living started to trend, too.

All these changes had a negative impact on the apparel industry, with industry profit sinking 50 to 60 percent in 2020. The year is now drawing to a close, but the pandemic isn’t over. What can retailers expect to happen next?

Changing Apparel Trends

According to the Moody’s report, the trends we saw this year will continue in 2021. And companies that can adapt to these changes by expanding their merchandise selection will prosper. The apparel industry’s profit is expected to grow 70 to 90 percent in 2021, especially during the second half of the year. The apparel industry is poised for a comeback—but there will still be risks.

The pandemic brought about a lot of economic uncertainty. With millions of Americans and Canadians out of work, many consumers simply don’t have the disposable income to spend on clothes. Retailers need to be committed for the long haul, as this issue might not be an easy fix.

It’s essential for apparel retailers to tweak both their product selection and their sales channels to align with the “new normal.” They also need to be mindful of issues such as sustainability and ethics, which are becoming more and more important to consumers.

Succeed in 2021 and Beyond

To succeed in 2021, apparel retailers need to be agile and flexible, keeping an eye on the state of the market and evolving with changes in consumer behaviour. Moody’s also reported that omnichannel services that have become popular during the pandemic—such as curbside pickup—will continue to be valuable in the future. Retailers can succeed by doubling down on efforts to make these services as streamlined as possible.

Digital acceleration is also picking up speed. Online sales as a percentage of total retail sales are expected to exceed 25 percent over the next five years. Investing in the automation of product data and EDI is a smart decision to help prepare for this change.

The COVID-19 pandemic has changed the apparel industry in numerous ways. With many of these changes likely to outlast the virus, smart retailers will adjust their strategies now to be prepared. Looking forward, our base case is cautiously optimistic, with the virus more effectively controlled over the coming year, thanks to a strong public health response.

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