The fashion industry is ruled by giants—mega-corporations from fast-fashion behemoths Zara and H&M to luxury titans like LVMH and Kering, which between them own brands including Louis Vuitton, Gucci, Dior, and Saint Laurent. These are publicly traded companies with tens of billions in annual sales, and they make most of the industry’s profits.
But they’re not all there is. Fashion is also filled with a large number of smaller, independent companies with far more modest sales. The New York Times recently noted nearly 40% of the 477 members of the Council of Fashion Designers of America—US fashion’s governing body—earned less than $1 million last year. Most brought in less than $5 million. While it’s true everyone is suffering from Covid-19, for many of these companies the pandemic presents a nightmare scenario.
Independent designers often operate on tight budgets, using the sales from one collection to fund the next. Many still rely on selling wholesale to retailers for the bulk of their earnings, and may sell just a few items straight to shoppers. Either way, any delays or disruptions in their sales can interrupt their cash flow and play havoc with the whole business. They may be unable to buy fabrics, pay manufacturers, or cover other bills, such as rent if they have a store.
“They live from shipping cycle to shipping cycle, no matter how glamorous they may appear to the public,” Gary Wassner, whose firm Hildun secures financing for fashion companies, wrote in a March letter to New York governor Andrew Cuomo, which was quoted recently by the Times.
Right now, many designers are having orders cut or canceled by retailers who have closed stores and face a plunge in demand for new clothing. Some aren’t certain how they’ll sell their next collection if buyers can’t visit their physical showrooms. Similar stories and concerns are emerging from designers in France, Italy, and the US. Some are devising ways to get by and setting up digital showrooms. But a number simply don’t have the cash to last long in such circumstances.
A March survey of designers by the British Fashion Council found 35% believed they would go out of business within three months without external support. Half said they would go under by the end of the year.
“Without some sort of government intervention you could see a whole generation of creative business wiped out,” Caroline Rush, BFC’s chief executive, told the Guardian. The BFC has set up an emergency fund to help British designers but has called on the government to provide more aid, which it says is still needed.
Carlo Capasa, president of the Italian Chamber of Fashion, has also asked his country’s government for help. “It’s a true emergency,” he told the Financial Times (paywall).
Even Marc Jacobs, a well-known name in the industry, says he didn’t manufacture the clothes he designed for his last collection and won’t design a new collection next season. His brand is owned by LVMH.
Most other designers, however, don’t have a well-capitalized giant like that to help them. It’s unclear whether they’ll be able to survive.