The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — It was the week that fashion closed up shop.
As growing concerns over the rapid spread of the global coronavirus pandemic continue to mount, retailers are responding by shuttering their doors in increasing numbers: from department stores like Nordstrom and Saks in the US and Selfridges in the UK, to luxury names like Chanel and startups including Glossier and Everlane.
But questions remain around what these closures will mean for the retail workers that have been sent home, and further in the global supply chain, how it will affect delivery and factory employees.
Zero-hour contracts and minimal benefits are the norm for many retail staff. For many companies, this presents a dilemma: continue business as usual and risk putting employees’ health in danger; shut down operations and employees’ economic livelihood is under threat.
And for low-income workers within logistics and production, the stakes are even higher. Factory workers in particular remain among the most vulnerable groups within the fashion industry, especially those located in third-world countries.
“There’s lots of disruption in the supply chain. [In countries like Vietnam and Cambodia] there’s loss of work, and what happens to the workers? Do they get paid or not? And what if they don’t feel safe coming to work? It’s a very unclear, grey area,” said Tara Rangarajan, head of communications, brand relationships and country programmes at Better Work, a partnership between the UN’s International Labour Organisation and World Bank’s International Finance Corporation working to improve conditions and respect for labour rights in the garment industry.
What happens to the workers? Do they get paid or not? And what if they don't feel safe coming to work? It's a very unclear, grey area.
For many businesses, the financial support needed to take care of its workers may have to come from governments. Administrations across Europe, from the UK to France, Spain to Italy, are already looking at a mix of measures including tax deferrals, extensions on debt, social payments, state loans, and wage subsidies for impacted workers.
In the US, the White House proposed a $1.2 trillion stimulus package to help curb the economic fallout following the coronavirus pandemic. Proposals include sending cheques to Americans and deferment of income tax payments. In the interim, emergency coronavirus relief legislation was passed, providing workers diagnosed with or being treated for coronavirus with two weeks’ paid sick leave.
As more workplaces face the reality of disruptions and even shutdowns as a result of the Covid-19 pandemic, companies should look carefully to national labour laws for guidance.
“Most national laws have very clear policies about declaring force majeure [unforeseeable circumstances that prevent contract fulfilment] and how to handle issues around pay and other benefits,” said Better Work’s Rangarajan.
For Retail Workers, a Tenuous Future
On the retail store front, many fashion companies, from Ralph Lauren to Reformation, have committed to paying retail workers during temporary store closures, which many currently estimate to last between two to three weeks.
Yet it’s unclear what will happen beyond that. In China, quarantines went on for longer than expected in many provinces. Shops are now reopening, with some operating on limited business hours. But it will take time for consumer confidence to be restored to pre-pandemic levels.
For smaller, independent businesses that don’t have a cash cushion to withstand months of retail disruptions, the situation is more dire. If doors are shut and regular revenue isn’t coming in, companies may find it hard to pay their workers at all, let alone grant the more exposed among them long-term paid leave.
As Brendon Babenzien, founder of upstart streetwear label Noah, put it in a recent email to customers: “When people can’t consume, things begin to break down, people start losing jobs and then lose their ability to consume and it becomes a downward spiral. The only ones truly shielded from this are the ultra-wealthy and huge businesses that can rely on vast reserves. The rest of us could be in serious trouble.”
In the US, the number of Americans filing for unemployment was up 70,000 last week, according to figures from the US Department of Labor. On an international level, a preliminary assessment by the International Labour Organisation estimates that almost 25 million people globally may be pushed into unemployment as a result of the pandemic. Workers will also be hit with an estimated income loss of somewhere between $860 billion and $3.4 trillion by the end of 2020. (The United Nations agency also said an internationally coordinated policy response could significantly reduce unemployment impacts.)
For independent businesses like Noah, state support in the form of loans or unemployment relief will be crucial at this time.
“Employers will do what they can for the employees, but it has become clear over the past few days that the Government needs to intervene to protect employees’ income should they be laid off either temporarily or permanently,” said Andrew Goodacre, chief executive of the British Independent Retailers Association, a trade organisation.
Some corporations are promoting additional support systems for workers. PVH Corp., for example, has said that US-based employees (including retail workers and warehouse staff) in need of additional financial support can apply for a cash grant from its Associate Relief Fund programme, which is jointly funded by associates and PVH.
For Garment Manufacturers, Uncertainty Looms
Farther down the supply chain, the situation is perilous. Many companies rely on garment factories located in parts of the world where, in practice, workers tend to have fewer (if any) legal protections. Should brands start scaling back on production, factory workers stand to suffer immensely.
“In many cases the national laws [around workers’ rights] in countries like Cambodia and Vietnam are quite strong, it’s just a case that they’re not enforced on a regular basis,” Better Work’s Rangarajan said.
In many cases the national laws ... are quite strong, it's just a case that they're not enforced on a regular basis.
Other concerns for businesses include ensuring employees are educated about the illness and how to avoid it — and minimising discrimination that could arise as a result of misinformation around the spread of the disease.
“We are hearing of incidents across the supply chain in countries all over the world, where workers or managers are shamed, or people are being ostracised,” Rangarajan said.
Sabrina Finlay is chief executive of Otabo, a footwear and apparel manufacturing company headquartered in Minneapolis with a development facility in Guangzhou, China and factory partners all over the world. When the outbreak first hit in China in January, she had to act fast.
“Protecting our workforce and thinking about their health directly impacts how successful our operations are, directly impacts our ability to deliver on time, directly impacts our ability to keep developing new product,” she said.
Even now, as the country re-emerges from the throes of the epidemic, its government has acted cautiously to prevent another outbreak and Otabo is continuing to keep strict measures in place to protect her factory workforce. These include minimising the flow of people entering workspaces, preventing non-employees from entering the building, doubling up on cleaning efforts and administering health checks on everyone who enters the factory. Keeping everyone educated and informed continues to be important, not only to ensure that workers were keeping themselves and each other safe, but also to prevent the spread of panic.
“If we don't continue to be diligent about treating it on a human level, and looking at individuals and what they’re going through, paying attention to who’s getting sick, who needs treatment, thinking about how an individual acts in a group... Those are the things we’re still paying attention to,” Finlay said. “Even though we might feel like we’re in the clear now, factory workers work in very close knit tight communities, they’re in very large groups. If someone gets sick — and people will continue to get sick — we need to make sure we manage it so it doesn’t completely shut down the factory,” she said.
Protecting our workforce and thinking about their health directly impacts how successful our operations are.
Finlay already offered workers a benefits package including paid time off and overtime compensation in order to attract the best workers and retain them long-term. But long term, Otabo and companies like it will rely on continued incoming business to afford this. Many factories don’t even provide workers with such benefits, with workers entirely dependent on wages from incoming business.
“What big brands shouldn’t be doing is suspending contracts or not paying their suppliers as a result of this,” said Sarah Ditty, policy director at nonprofit Fashion Revolution. “It’s often the suppliers further down the chain who feel the brunt of it the most, and what [brands] should do is ensure those relationships are stable.”
Additional reporting by Sarah Kent.
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