Through-out the world business had been going through a tough phase in 2019-20 and every business was expecting some kind of positivity for 2020-21. Unexpectedly came CORONA virus outbreak in end of January in China.
The total world business scenario completely changed. Eventhough china was the first country to get affectedthe world didn’t take it seriously initially and all countries reacted atleast 2-3 weeks late on what steps they had taken then.
The whole world started to see the seriousness of covid 19 and started shutdown all over the world, which led to closure of Stores and Factories for at least 8-10 weeks on all business.
The closure of stores/malls led to stock pile of all inventory which was up to sale. 10 weeks of no direct sales led to immediate stoppage of existing orders and future orders. The brands /customers are waiting for the opening of stores/malls to start the sales which means 3 months of existing stocks and bleak future of sales due to weaker economy and job losses.
The leather and shoe business in china was the first to face the heat in early march.
Many major brands and small brands asked the shoe factories to hold the existing production and asked not to ship the finished shoes until further notice. The shoe factory has no other option but to pass the same to the leather tanners.
Most leather tanners were stuck with finished leather and leather in work plus raw material. The immediate stoppage led to various difficult decisions to be made. There was 50-70% Reduction of people and working time. All tanners and shoe factories had to reduce the working time and wait for customer’s directions.
Production all over shoe factories and tanners are currently down 50-70%. This situation is expected to last at least until august/September as from june some normalcy is expected through out the world. There could be temporary shutdown expected in between but other than learning to live along with COVID 19 there is no other current option. In the last 2 months, Official figures of major brands show sales drop of 50-58% in athletic shoes and 60-75% drop in brown shoes.
These numbers of drop in sales will be the same for the next 3-4 months. This could lead to many bankruptcy of brands(some brand had already filed bankruptcy) and retailers in shoe and apparel business. As a chain reaction the factories which were supplying these brands and retailers are forced to run out of business. This leads to job cuts/salary reduction/furlough and hit the whole economy of the respective countries. The future of business and life will change for ever and everyone has to start to learn the new way of living. The business will have to adjust to the new norms at the reduced level. This will be the end of globalisation and more of regional business has to be answer for new norms. All country economy will shrink and cash flow will be very much affected. Earlier payment terms will be changed and extended, which means more capital will be needed to run the business. The final verdict is only companies with good fundamentals, financial strength and ability to adapt to the new lower norms will survive this whole pandemic.