With the news of Matches Fashion, Selfridges, Nike, Abercrombie & Fitch and Urban Outfitters, and many more, all closing the doors on their stores, fashion retailers should brace for tumultuous times.

We’re seeing an unprecedented drop in footfall - conservative estimates place the drop in footfall at least 13% percent year-on-year, but many people I talk to are suggesting higher. In the UK, Laura Ashley has fallen into administration, the first high profile victim of COVID 19. The pandemic has had an immediate and significant impact on trading.

This is a constantly evolving situation - the government last night announced a £350bn rescue package for British business - “It includes £330bn in loans, £20bn in other aid, a business rates holiday, and grants for retailers.”

While this helps to solve a number of issues, these measures will not reduce current and future excess stock levels - that's going to be a job for the retailer themselves. Fashion retailers need to take sensible precautions right now to ensure their survival.

By January 2021, UK retail should be braced for a perfect storm of cash flow problems. This will be caused by three external factors:

Decreased sales right now, caused by Coronavirus, meaning increasing excess inventory.
Less time to sell products over the summer season, caused by delays to manufacture and delivery as a result of Coronavirus, meaning yet more excess inventory issues.
Tariff hikes as a result of Brexit.

Retailers will end up in a situation where they have huge swathes of cash tied up in excess inventory, at a time where costs start to increase.

Predictions state that the Coronavirus pandemic could last until Spring 2021 - businesses should prepare for the worst now. Vogue Business examined how this issue is shaping up for luxury brands in the light of decreased demand for Spring/Summer 2020. But, the same story rings true across the whole fashion industry.

Our data team has already seen a huge jump in the number of products being discounted by retailers in the face of the COVID 19 crisis, a 30% YoY increase. This indicates that retailers are urgently trying to mitigate the decline in footfall they have already experienced.

The transition period for Brexit may have been pushed to the back of people’s minds in the face of the COVID 19 crisis, however, that does not mean it has gone away. The UK still needs to organise a future relationship with our biggest trading partner by December 2020. Legally, there can be no extension. With all the risks and tariffs associated with effectively a ‘No Deal’, the UK apparel industry needs to prepare itself for increased prices on imported raw materials and finished clothing. How Covid 19 will affect this whole scenario adds yet more uncertainty.

Cash is King

One simple mantra that always rings true, especially now is that 'cash is King'. With trade and footfall down, retailers have a challenge on their hands. They need to:

Turn excess stock into cash quickly.
They need to achieve that, whilst not destroying margins.
They need to maintain brand equity through times of strife so that they continue apace when things improve.

With so much potential excess stock, clearing as much existing excess now is paramount. Having a lower excess inventory base to start from when the real problem hits will make a big difference.

Smart planning is at the crux of the issue, and the destruction of stock simply isn’t a consideration, especially when you consider the potential public backlash and emerging sustainability legislation.

And selling excess inventory at a significant loss just isn't practical, especially given the rising costs on the horizon.

Many brands will be looking to physical sales outlets, but the effect on footfall is already huge, and there is no telling how long this may continue. The likes of Bicester Village are hugely popular, especially with cash-rich Chinese tourists, but we are yet to understand the true ramifications of travel bans in the near to mid future. Visitor numbers from China have dropped 85% this month alone.

Retailers need to ensure they are identifying as many digital channels as possible that allow them to turn excess inventory quickly into cash, without damaging margins and brand equity. Doing this will offer a fighting chance of coming out the other side of this unique situation in the best shape possible.

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