16 Apr Brand Finance Report Sees Significant COVID-19 Impact On Apparel Sector
Nike retained its title as the world’s most valuable apparel brand, brand value up 7 percent, according to the Brand Finance Global 500 2020. However, the report found the apparel sector will be among the most affected by the COVID-19 pandemic.
Overall, the Brand Finance Global 500 2020 finds the brand value of the world’s 500 biggest companies is set to potentially lose up to an estimated U.S. $1 trillion as a result of the coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on January 1, 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories — limited impact (0 percent brand value loss), moderate impact (up to 10 percent brand value loss) and heavy impact (up to 20 percent brand value loss) — based on the severity of enterprise value loss observed for the sector in the period between January 2020 and March 2020.
Brand Finance’s COVID-19 impact analysis shows that the apparel sector is one of the most heavily impacted industries, globally, and could face a potential 20 percent loss in brand value as a result of the pandemic.
Brand Finance said in a statement, “Despite the havoc that COVID-19 is undoubtedly going to wreak on the sector in the coming year, agile brands are likely to fare much better than their inflexible counterparts. With new consumer behavior habits likely to be borne out of the pandemic, brands will look towards greater innovation in their e-commerce businesses and the potential reassessment of their store business models.”
The statement adds, “As with most sectors, however, the damage that will ensue on apparel brands will greatly depend on how long this pandemic engulfs the world.”
Richard Haigh, managing director, Brand Finance commented, “The COVID-19 pandemic is undoubtedly going to hit the apparel sector hard – Brand Finance has predicted that apparel brands could face up to a 20 percent drop in brand value. As these brands negotiate store and factory closures, broken supply chains and a customer base that is facing unprecedented economic uncertainty, they will have to prepare for a tough and turbulent journey ahead.”
The Brand Finance Global 500 2020 found Nike claimed the title of the world’s most valuable apparel brand for the sixth consecutive year, recording a 7 percent increase in brand value to US$34.8 billion, as of January 1, 2020.
Regarding Nike, Adidas stayed in third place as its brand value dropped 1 percent to $16.5 billion, behind Gucci in second, which rose 20 percent to $17.6 billion.
Regarding Nike, Brand Finance wrote in its press release, “The sports giant has focused on implementing a pivotal distribution strategy move, drastically reducing the number of retailers selling its products, with the aim of regaining control of the brand/customer relationship and improving profit margins.
“Nike’s bitter rival and fellow sportswear superpower, Adidas, has seen a less successful year, recording a 1 percent decrease in brand value to US$16.5 billion.
“Both brands, however, have been forced to close stores following the COVID-19 pandemic and thus sales are going to take a damaging hit. Adidas announced that it expects to lose over US$1 billion from sales in the first quarter of 2020 from greater China alone.
“Both brands will need to rely heavily on their e-commerce businesses to protect themselves as much as possible. Nike surpassed the US$1 billion milestone in quarterly online sales last year, a feat that not only demonstrates the brand’s sheer dominance in the sector but also puts the brand in a solid position to rise up to the challenge of current worldwide turmoil.”