The pandemic has acted as a strongly disruptive force in the global economy, triggering significant shifts in production processes, supply chain management, shopping habits and customer relations across many sectors, including the footwear and leather goods sector.
These topics and the broader post-Covid globalisation process were discussed in the latest Expo Riva Schuh live talk, with João Maia, general manager at the Portuguese footwear, components, leather goods manufacturers’ association Apiccaps, Elisabetta Mantese, manager at credit insurance company Euler Hermes, and Enrico Cietta, CEO of consultancy firm Diomedea.
The crisis brought about by the coronavirus was in some respects unprecedented in recent times. Firstly, “the shock we are living is totally external to the economic system, differently from other economic crises”, said Cietta. “The second difference is that the main objectives of the crisis in the past were some specific economic variables, that then spread to the economy as a whole. In this case, the crisis impacted directly the globalisation process,” he added. The current crisis is also asymmetrical, Cietta said, and its impact will vary depending on the economic sectors and geographical areas, so that “what we can expect is that this crisis will have an impact on how power in the market is distributed.”
For instance, in the footwear and fashion sector the Asian markets performed particularly well, as opposed to Europe, where the confidence indicator was clearly below average, Maia said.
In the footwear sector, the product categories that were most hit were classic shoes and shoes for formal events, Maia added.
Consumption drivers have also shifted. Purchasing power and price were two main factors that drive the purchase of shoes, Maia said. Fashion trends was another important factor, but with the pandemic it has now dropped to 4th position, while sustainability has gained importance.
Meanwhile, the premium footwear features consumers are willing to pay more for are now:
2. Extended durability
3. Recycled materials
4. National production
5. Online shopping and home delivery
Companies find themselves navigating a highly challenging situation, not only because of the shift in production processes, supply chain management and in consumption behavior, but also on the cash flow and credit front.
In fact, “Covid-19 is creating an insolvency time bomb for companies,” Mantese said, with a “dry-up of their cash buffers” and a growing number of companies at risk of a cash flow crisis. As the pandemic has affected short-term cash flow for many companies, resulting in slower payments, the entire value chain is at risk.
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