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USA: the crisis of the department stores

USA: the crisis of the department stores

The spread of coronavirus epidemic and the resulting health emergency is having a very severe impact on many realities of the fashion sector, some of which are risking not to recover from the crisis that is now upon us.

The department stores are also involved in this scenario, which have had to take severe measures to try to stem the effects of the blow suffered. The U.S. Department of Commerce has estimated that sales in clothing and accessory stores have halved by 50.5% in March and will further decline in the coming months.

Following this sudden slowdown, Macy’s, owner of Bloomingdale’s, put most of its employees into layoffs, blocked hiring and canceled orders.

Cowen Studio also calculated that many other large distribution chains including Nordstrom and J.C. Penney can only last in this way for no more than 8 months and some even less. Neiman Marcus, also owner of Bergdorf Goodman, was expected to be one of the first to collapse and, in fact, they have just declared to be in bankruptcy. 48 stores were closed.

To accelerate this progressive collapse there is also the fact that the department stores had previously suffered the blow of the advent of online shopping, of flourishing realities such as Amazon and of the fast fashion system, which has helped to eradicate both small and large companies from the market.

The fall of many department stores will also impact the urban conformation of cities; indeed, Robert Burke Associates predicts that following the emergency there may be one or two warehouses per city compared to the five on average that were active before the pandemic. In addition to the modification of the urban plan, there is the human and social aspect to be considered. Already in 2008, during the crisis that hit the United States, there was a heavy increase in the number of people on the unemployment list. At the time, the contraction in GDP reached 8.4%. The International Monetary Fund expects a 5.9% contraction in 2020.

To cope with the serious economic loss that some department stores are suffering from, many are implementing a strategy that provides furlough (unpaid leave) for many employees, which go along with the cuts in wages of CEOs and executive directors.

The Tapestry group, which boasts brands such as Coach, Stuart Weitzman and Kate Spade, has removed 2,100 part-time jobs in stores as early as April 25. Employees received compensation of $ 1,000 (which is equivalent to circa 923 euros). His board of directors reduced their salary by 50%. The other members operating in North America who deal with the retailing of Tapestry products will continue to receive wages and social benefits until May 30th.

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Un post condiviso da Calvin Klein (@calvinklein) in data:

A similar approach has been adopted by Arcadia, which owns Topshop and Dorothy Perkins. The group dismissed around 14,500 people without pay. Primark, which is losing € 650 million a month, has also closed all its stores in the UK and dismissed around 30,000 people without pay since April 5. Significant reductions were also made on the remuneration of the CEO and executives.

Many other companies are suffering the same fate, including the PVH group (Calvin Klein and Tommy Hilfiger), which has put 75% of its employees on unpaid leave and Capri Holdings (Michael Kors, Versace) who has left without pay 7,000 North American employees.

Although the future of the sector remains uncertain, what emerges from these countermeasures is that not only the way of producing and distributing fashion will change, but also the social and urban planning of an entire country.

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