Impact of COVID on Fashion Industry: Environmental Analysis

This report analyses the impact of COVID-19 on the fashion industry and the major forces that have shaped the business environment. It critically assesses the opportunities and challenges that these forces have presented to the key players in the fashion industry and explains why and how some firms have been able to adapt better than others to this changing business environment.

Impact of covid on
fashion industry -
environmental analysis
of fashion industry

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analyse the impact of the pandemic and explain the major forces that have shaped the
business environment of the fashion industry........................................................................3
critically assess the opportunities and challenges that these forces have presented to the key
players in the fashion industry and explain why and how some firms have been able to adapt
better than others to this changing business environment......................................................4
SWOT analysis:......................................................................................................................4
Competitive forces:................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The global pandemic has affected the fashion industry while many fashion brands are
struggling to survive in this scenario. The customer survey by McKinsey has revealed that there
is a significant drop in the customer intention to purchase. It is different in online versus offline
channels. Present report is based on analysing the various opportunities and challenges that are
associated with this changing external environment. GUCCI is a Italian luxury fashion brand that
is having presence in Italy (Pal and Gander, 2018). They are dealing in various product line that
includes accessories, footwear, handbags, fragrances and home decoration, it was started in the
year 1921. presently the impact of COVID 19 has resulted into a complete transformation of
many industries that is going to posses a impact on the overall functioning of the organisation
and industry as a whole.
MAIN BODY
Analyse the impact of the pandemic and explain the major forces that have shaped the business
environment of the fashion industry
There are many different factors that are part of the macro environment and are posing a impact
on the overall organisation functioning. For this purpose some of the factors which are going to
shape the future of fashion industry after the post COVID period is discussed as below:
Political: Political factors of a country includes the various taxation policies, import and export
laws that are posing a impact on the present policies and functions of the organisation. GUCCI is
dealing with red tapism in countries like China and India that is leading unfavourable
environment for smooth functioning of brands (Lynge-Jorlén,, 2017). They are having no
systematic framework for proprioception of intellectual property rights as investors are not
willing to invest in the expansion aspects of market expansion of GUCCI.
Economic: GUCCI as a luxury fashion brand is playing a crucial rile in economies of France and
Italy. It has been hard hit by the lock-downs as there is now closure of stores across the globe
that is facing uncertainty as there is reduction in the personal disposable income of people
(Niinimäki, 2018). As per view of Spokesperson of GUCCI it is said that the price changes may
narrow the gap between handbags prices in Europe that may be lower than major luxury markets
in china where shoppers have queued at stores emerged from lock-down.

Social: Due to the shift in changing preferences of customers now they are willing to make
purchases through online medium in order to have proper social distancing measures. The use of
various social Media practises and digital marketing strategies where GUCCI is willing to use
members for selling wristwatches, collaboration with visual artists of Instagram. In the lock-
down situation of COVID 19 virus there is more engagement of people on social media
application that is leading to opportunities
Technological: There so focus on the technology shift were people are now willing to utilise
more application of various online available mediums as compared to physical stores for their
purchases (Sandvik and Stubbs, , 2019). GUCCI can avail the opportunity of shifting per-fences
of people towards digital stores that can help them in maximisation of their present market share.
Legal: GUCCI has entered into partnership agreements with various existing brands that
includes John Legend and Floernce welch. In some instances GUCCI has also faced issues with
respect to failure to register their trademark because of trademark infringement that have been
initiated with respect to unauthorised use of mark. With the pandemic impact GUCCI is
observing potential pitfalls because of such legal battle they are willing to work towards tailoring
of the legal strategies to reconcile with the clashing realities.
Environmental: GUCCI is working towards contributing towards the environment, they are
working on various social responsibility activities. They have founded the chime for change that
is a global campaign (Chun, Gurova and Niinimäki, 2017). The organisation has put their
suppliers, employees and community at the top of their orientation, they are also working
towards ensuring that in the pandemic situation of COVID 19 when employee were not laid off
and in case of physical closure of stores they were offered timely salaries. They also ensure
proper safety of their employees.
critically assess the opportunities and challenges that these forces have presented to the key
players in the fashion industry and explain why and how some firms have been able to
adapt better than others to this changing business environment
In order to develop a understand of the internal factors affecting functioning og GUCCI there is
use of SWOT analysis as a framework to understand the internal strategies that can be used for
availing the opportunities that are available for the organisation:
SWOT analysis:
Strengths:

Brand equity: It is a fashion brand that is selling products at a premium prices.
High quality products: They ate offering high quality products and have established brand name
as most luxurious items. They are having a brand value of 22.6 billion folrs in year 2020 it is
ranked 31st company among this list.
GUCCI is having 500 stores across countries and in various emerging countries.
Weakness:
GUCCI has been facing may trademark controversies. There is high competition from various
brands that is leading to difficulty for GUCCI in sustaining of their present competitive position
in the market.
There are gaps in the present product range of product and future customer requirements. With
the post covid 19 impact there is reduction purchasing power of people which is leading to less
preferences for luxury products. So, GUCCI has to focus more on development of new range of
products at reasonable prices to deal with such gaps to meet the changing customer needs.
Opportunities:
Digital store-fronts; there is more focus on the digital fashions shopping that is going to help
customers in offering of bulk of new accessories and clothes for time period of next two years
(Sari and Asad, 2019).
Sustainable fashion: Demand for sustainable fashion is going to enhance in coming time period.
Threats:
GUCCI sales were hard hit at the beginning stages of coronavirus crisis because this brand
strongly relied on Chinese customers. There is need to focus on creation of Strong positioning
for their recovery. There is a threat from the changing strategies of various other competitive
brands of GUCCI that includes ZARA, H&M.
From above SWOT analysis it is Summarised that GUCCI has to work towards managing
of their present product range and pricing strategies. The brand can use differentiated pricing
strategy for the purpose of maximisation of their demand that will assist them in having products
for different customer segments. Digital marketing strategy can be adopted to focus on
promotion and marketing of brand via use of social media applications to ensure higher customer
engagement.

Competitive forces:
In the present scenario GUCCI as a luxury goods giants has shown that COVID 19 can lead to
requirement of a solid recovery in the second half. The organisation behind brands like GUCCI
Bargaining power of customers: There is a high bargaining power of customers because the
covid 19 situation has lead to reduction in the purchasing capacity of the people. There is loss in
their employment and shift in the preferences towards products that can be used to fulfil the
necessity requirements of the people. It has lead to high bargaining power of customers as they
are having lot of options available among which they can fulfil their purchasing requirements.
Bargaining power of suppliers: In the present scenario when the world is hit by COVID 19
virus GUCCI is having moderate bargaining power of its suppliers (Olatubosun, Charles, and
Omoyele, 2021). They are having a independent supplier base since 2017 GUCCI is one of the
growing fashion brands that is following a flamboyant design makeover plans to cut their
independent supplier up to 40 percent. The main focus of this Italian brand is to aim to halve a
turnaround time between the conception of product and delivery in the store that can help them
in securing the production capacity that is required to be match its sales ambitions. They are
working towards maximisation of their products from local suppliers so that they are able to have
proper internal products by creation of joint ventures with various external workshops through
exclusive contracts. This is going to help them in dealing with the online demand of products.
Threat of new entrants: In the present situation of COVID 19 there is a very low threat of new
entrants that may affect the brand positioning of GUCCI. The main reason behind is that
organisations are not willing to invest more in luxury barning because of the shift in the
preferences of people from luxury to necessity goods because of the overall reduction in their
purchasing power.
Threat of substitutes: GUCCI is a high luxury brands is offering high quality products. But the
threat of substitution is very high because of presence of various other luxurious fashion brands.
It includes Christian Dior that is offering luxury apparel and accessories (Gibson, 2017). It also
includes Armani, Prada and Chanel that is offering fashion products, luxury goods, jewellery,
watches. With the effect of COVID 19 virus brands are developing innovation strategies to
satisfy it as per changing customer requirements. So, GUCCI has to deal with the high threat of
substitution from these existing brands.

An other competitive brand of GUCCI that is Zara has presently adapted itself in this covid 19
situation by taking advantage of the present technology conditions for controlling all the aspects
of production, distribution and design process. They are willing to meet all the ends of supply
chain by keeping the continuous communication to ensure that there is proper exchange and
communication about the new trends. Zara is working towards review of the operational
procedures to reassure the employees and customers to secure the information transfer process.
Competitive rivalry: GUCCI is having a differentiation market position that is they are having
featured online ready to wear collections that is curated to appear on runway. They are
representing it in a subtle and smart way by making their customer feel a differences. Their
marketing strategies are also helping them in publishing of a image driven content that includes
rich imagery (Kim and et.al., 2021). The website features a plethora of visual content that is
featuring brands campaigns and collections the product pages are also filled up with high quality
images of the products that can be viewed with multiple angles. They are using several
collaborative working strategies such as collaboration with Beyonce all this is leading to
achievement of a competitive advantage for GUCCI in long run. The impact of COVID 19 will
not affect the market positioning of this luxurious fashion brand in long run because of the brand
image that is built up and a loyal customer base that is helping them in achievement of required
competitive advantage.
From the above made analysis it can be said that GUCCI can presently focus on using the
competitive position for the purpose of expanding of their present market share. Zara as
competitive brands of GUCCI has created one of the best business model by regularly driving
the double digits growth. They are working towards focusing on mix of manufacturing plants in
Asia for stable demand combined with flexible plans in Europe to deal with the future
unprecedentedly demand (Gardetti and Torres, 2017). It will help in giving more speed and
flexibility to the present functioning of Zara. GUCCI can work towards adoption of some new
digital model in order to deal with the changing preferences of customers in the uncertain market
environment post COVID impact.

CONCLUSION
It is concluded from the above discussed scenario that COVID 19 impact has affected all
the industries in different manner. The retail sector is facing huge loses because of the closing
down of many physical stores. So there is a need to focus on formation of some effective social
media marketing and digital strategies that can be adopted to minimise the negative impact of the
declining sales and productivity in this present situation of market.

REFERENCES
Books and Journal
Chun, N., Gurova, O. and Niinimäki, K., 2017. Rethinking the roles of fashion designers. The
case of Pre Helsinki. The Design Journal, 20(sup1), pp.S4477-S4486.
Gardetti, M.A. and Torres, A.L. eds., 2017. Sustainability in fashion and textiles: values, design,
production and consumption. Routledge.
Gibson, I., 2017. The changing face of additive manufacturing. Journal of Manufacturing
Technology Management.
Kim and et.al., 2021. Fashion trends: Analysis and forecasting. Bloomsbury Publishing.
Lynge-Jorlén, A., 2017. Niche fashion magazines: Changing the shape of fashion. Bloomsbury
Publishing.
Niinimäki, K., 2018. Sustainable fashion in a circular economy. Aalto University.
Olatubosun, P., Charles, E. and Omoyele, T., 2021. Rethinking luxury brands and sustainable
fashion business models in a risk society. Journal of Design, Business & Society, 7(1),
pp.49-81.
Pal, R. and Gander, J., 2018. Modelling environmental value: An examination of sustainable
business models within the fashion industry. Journal of Cleaner Production, 184, pp.251-
263.
Sandvik, I.M. and Stubbs, W., 2019. Circular fashion supply chain through textile-to-textile
recycling. Journal of Fashion Marketing and Management: An International Journal.
Sari, R.P. and Asad, N., 2019. New product development-processes in the fashion industry:
Evidence from Indonesian Islamic fashion companies. Journal of Islamic Marketing.
Online
Covid-19: Gucci hikes handbag prices to curb coronavirus hit, says analyst, 2020 [online],
Available through<https://www.hindustantimes.com/fashion-and-trends/covid-19-gucci-hikes-
handbag-prices-to-curb-coronavirus-hit-says-analyst/story-jjhQs1jUJDAWjeyEgGzlqI.html>
With sales boom in mind, Gucci tightens grip on suppliers, 2018 [online], Available
through<https://www.reuters.com/article/us-kering-gucci-manufacturing-idUKKCN1J50S6>
https://craft.co/gucci/competitors>