Coronavirus could spell the end of fashion brands as demand and money dry up
A seating area typically filled with people is virtually empty as a man walks through Herald Square with a face mask on March 12, 2020 in New York City.
Gary Hershorn | Getty Images
Without quick government help, the people whose jobs propel the fashion industry – designers, suppliers and other workers – face financial ruin, US brands warn.
Fashion brands rely on department store sales to pay their bills. Demand for new products has vanished over the past month as major US retail chains, including Macy’s, Neiman Marcus and Nordstrom, have closed their stores amid the coronavirus pandemic. Many do not pay for shipments of products already in their stores
“Anything that’s ever shipped, they say, ‘We’re not paying you because our stores are closed. We need another 90 days, ”said Gary Wassner, CEO of Hilldun, a company that helps fund fashion brands.
This means that brands need the money now: to pay their seamstresses, to pay for materials, to buy garment bags, to prepare for the crucial holiday season.
Unlike other small businesses, many of these brands are limited in their ability to operate the $ 350 billion small business loan program established as part of the $ 2 trillion stimulus and relief bill. dollars signed by President Donald Trump at the end of last month. Fashion brands often rely on a method of financing called factoring, whereby they can use their delinquencies as collateral for money. Other businesses typically rely on bank loans for financing.
Factoring is necessary for brands because while cash flows in the fashion industry are irregular and seasonal, invoices are not.
Factoring organizations are not directly supported by the CARES law. While fashion brands might turn to banks for financing, many have little to no relationships with banks that work with the government on loans. For the sake of speed and efficiency, some banks have given priority to loans to companies with which they already have relationships.
“We already know there won’t be enough money [for the small business loan program]”Hilldun’s Wassner said.” You are asking an industry that relies on factoring to go now and open an account at a bank that they have no relationship with. By the time they get to the end of the queue, they’re out of money. “
Treasury Secretary Steven Mnuchin said on Tuesday he was seeking an additional $ 250 billion for the small business loan program. Democratic lawmakers, meanwhile, are urging that part of the small business lending program be reserved for businesses with no bank connections.
Designer Jason Wu said in an interview with CNBC that while his eponymous high-end sportswear brand may weather the storm, he’s worried that many small designers can’t. Its brand’s parent company, JWU, was acquired last year by Chinese private equity firm Green Harbor Investment. Hilldun is a minority investor in the company.
Without relief, Wu said, the pain could spill over to all independent brands in the United States and throughout the supply chain.
“It’s also going to kill a legacy of American fashion, the craftsmanship of the seamstresses, the amazing pattern makers, who make flowers – that’s basically the whole of Seventh Avenue,” Wu said.
The legacy of “Fashion Avenue”
New York’s Seventh Avenue, also known as “Fashion Avenue”, is iconic for its role in the apparel and fashion industries. At the start of the 20th century, it was the center of professional activity for many Jewish immigrants. Wu is a Taiwanese-born designer who dressed former First Lady Michelle Obama.
But Seventh Avenue has already changed from what it once was, as today’s shoppers have focused on mass-produced fashion and the retailers themselves have come under pressure. The street is now home to hotels, restaurants and a theater, as well as its Fashion Walk of Fame,
Wu said he feared Seventh Avenue, as it was once called, could be completely swept away.
“We watch the end of the seventh Avenue, ”Wu pointed out.
Seeking relief, retail and manufacturing executives from companies like Under Armor and Levi’s wrote to the White House last week asking for a 90- to 180-day stay in office. “Big brands that need a stimulus package,” Wu said. “We need to preserve the unique nature of these small businesses – which greatly fuel the productivity of the industry.”